Airlines are unlikely to recoup this loss as growth is not expected to return to pre-pandemic levels of double-digit increase at least in the medium term, Crisil Research said.
"Indian airlines are staring at a massive Rs 1.1-1.3 lakh crore revenue forgone over fiscals 2020 to 2022 due to pandemic," the report stated.
One would have assumed that the expected plunge in crude oil prices to USD 38-42 per barrel in fiscal 2021 compared with USD 64-66 per barrel in fiscal 2020 would have helped airline companies to an extent on the margin front as it forms a sizeable 30-45 per cent of an airline's cost base, it said.
However, because of the outsized impact of the demand destruction, airlines are curtailing capacity deployment, thereby restricting opportunities to accrue the benefit of low crude oil prices, the report added.
Airlines are projected to post losses at Ebitdar as well as Ebitda levels in fiscal 2021 as fixed costs, such as lease rentals, employee expenses and maintenance tasks, had to be met even when the airplanes were grounded, according to Crisil.
Curtailed mobility of people due to the COVID-19 pandemic and related restrictions will shrink domestic air passenger traffic by 40-45 per cent and international traffic by 60-65 per cent, respectively, this fiscal, the report said.
With the COVID-19 pandemic still raging in much of the world, a revival to pre-pandemic levels appears unlikely even next fiscal, it said.
This is a serious jolt to the Indian domestic air travel industry that had logged double-digit growth in seven of the past ten fiscals before its fortunes took a turn for the worse with the bankruptcy and grounding of a couple of major carriers, the report added.
Expecting the domestic passenger traffic to be 78-83 million this fiscal, similar to fiscal 2016, Crisil said domestic demand could see an increase in Q3/Q4 owing to the festive season, although it will still be lower on-year.
Looking into fiscal 2022, Crisil does not see the traffic situation improving unless the pandemic is brought under control, it said.
According to Crisil, ticket prices on domestic routes, which are currently under a fixed cap till August 24, are expected to come off from the third quarter and will on average be lower on-year this fiscal.
However, air fares may rise 4-6 per cent on-year on international routes despite low passenger traffic volume.
Delayed resumption of international operations is likely to translate into a steep drop in passenger numbers for fiscal 2021, which may be at fiscal 2008 level at 25-30 million, it said.
While international operations are expected to resume in August (which were grounded from March 23), there is uncertainty with regard to granting of air travel permissions by different countries and because of visa application backlog, it said.
The share of Indian carriers in international traffic is set to rise to 40-42 per cent in fiscals 2021 and 2022 from around 36 per cent over fiscals 2016 to 2020 as travellers are likely to prefer short to medium haul destinations owing to lower incidence of COVID-19 cases in neighbouring countries, preference for direct flights over transit through hubs and lower trip costs, which can all be served by Indian carriers, Crisil Research stated.
The pandemic is bound to affect the net fleet addition of Indian carriers, which had about 900 aircraft on order as on March 31, because traffic is unlikely to rebound to even fiscal 2020 level in the medium term and fleet additions are likely to be limited to fleet replacement, with newer generation aircraft replacing older generation leased aircraft, Crisil said. IAS RVK