Airlines may post losses of $1.4 bn in FY '15

Airlines may post losses of $1.4 bn in FY '15

India-based airlines are expected to post losses of around $1.3‐1.4 billion this fiscal while the carriers, excluding IndiGo, may require funding of around $1.6 billion which could be a challenging job, aviation thinktank Centre for Asia Pacific Aviation (CAPA) has claimed

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In its 'India Aviation Outlook Report FY 2015', CAPA said that economic recovery remains sluggish and conditions may not improve substantially until the third or fourth quarter of the fiscal resulting in only modest growth in domestic traffic. However, the international market will be more robust compared to the domestic market, CAPA noted.The thinktank noted that over the last seven years Indian airlines have lost approximately $10.6 billion, and the "red ink is expected to continue".

"After posting combined industry loss of approximately $1.7 billion in 2013-14, CAPA estimates that there will only be slight improvement in 2014-15, with projected losses in the range of $1.3‐1.4 billion. Losses could track further upward as some low-cost carriers have substantial major maintenance checks scheduled this year, the cost of which will be higher than the reserves currently held by lessors," the report said.

CAPA also predicted the possibility of a fare war in the July-September period, calling it a "critical quarter". It said the working capital requirements of some airlines could spark a repeat of last year's fare war.

"The second quarter is traditionally the weakest for Indian carriers, and in 2013-14, the situation was exacerbated by the exchange rate crisis which saw the rupee depreciate by more than 20 per cent between May 2013 and August 2013. During this challenging period, airlines engaged in aggressive discounting.

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