2021-22 expected to be another year of large losses for Indian aviation industry: CAPA India

The Indian aviation industry is expected to continue incurring large losses in 2021-22 and IndiGo airline will emerge from the COVID-19 pandemic significantly stronger than its competitors, said aviation consultancy firm CAPA India on Monday.

“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,” said CAPA India in its report about the ‘top ten trends to watch in 2021’.

While revenue remains under pressure, costs will also increase relative to FY2021, the report mentioned, adding that 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 affect costs of running an airline. The report said consolidation is inevitable in the Indian aviation sector and it could result in a “2-3 airline system” in the near to medium term.

“The structure of competition may change in the near to medium term, possibly resulting in a two-horse race in both the airline and airport sectors,” it mentioned. The demand recovery, especially in international traffic, remains uncertain, it stated.?

In the absence of a full recovery in higher-yielding segments such as corporate travel, airlines cannot be profitable, it noted.

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