- CAPA India stated that the Indian aviation industry will probably continue incurring large losses in 2021-22
- Brent Crude is assumed to be at average USD 50-60 per barrel and the USD/INR exchange rate is expected to remain in the range of 73-75 in the next financial year
- The government may be tempted to maintain price floors and caps, at least for the first half of 2021
THoD Newsdesk, India: On Monday, CAPA India, an aviation consulting firm stated that the Indian aviation industry will probably continue incurring large losses in 2021-22 and IndiGo airline will emerge from the COVID-19 pandemic significantly stronger than its competitors. This credit could go to IndiGo’s strong balance sheet.
In an official statement about the ‘top ten trends to watch in 2021’, CAPA stated, “Airlines will have to carry the costs of a large proportion of their fleet remaining grounded, especially those that were earlier deployed on international routes.”
The report further mentioned that although revenue remains under pressure, costs will also see a surge relative to FY2021. As per a statement in the report, the Brent Crude is assumed to be at average USD 50-60 per barrel and the USD/INR exchange rate is expected to remain in the range of 73-75 in the next financial year. Oil prices and exchange rate are two of the major factors that are involved in the costs of operating an airline.
CAPA India in its report, also said that consolidation is inevitable in the Indian aviation sector and it could result in a “2-3 airline system” in the near to medium term and further, the structure of competition may change in the near to medium term. This could possibly result in a two-horse race in both the airline and airport sectors. The demand recovery, especially in international traffic, remains uncertain, according to CAPA. Due to the lack of a full-term recovery in higher-yielding segments, airlines cannot be reaping any profits, it noted.
The report said that the lenders and investors will remain wary of the sector (especially airlines) unless the government intervenes in the form of sector-specific policy measures. It also stated that the government may be tempted to maintain price floors and caps, at least for the first half of 2021.
