After second Covid wave, IndiGo may emerge stronger than its competitors: CAPA India – ET TravelWorld

After second Covid wave, IndiGo may emerge stronger than its competitors: CAPA India
In light of the second Covid wave in the country, CAPA India estimates that the likelihood of IndiGo emerging significantly stronger than its competitors has increased. Nevertheless, despite being better placed to withstand the latest downturn in traffic, IndiGo will also feel a very significant impact.

Providing an update on its ‘Key Trends in Indian Aviation in FY2022’ report released in January 2021, CAPA points out that demand uncertainty has been exacerbated by the second Covid-19 wave. CAPA has once again urged the Ministry of Civil Aviation to create a new policy framework. CAPA says, “The original National Civil Aviation Policy (NCAP) released in 2016 was designed for an environment of growth. Post-Covid there is a need for NCAP 2.0 – possibly as an interim measure – to support sectoral emergence from the crisis through the stages of survival, stabilisation, recovery and eventually expansion. In line with the Prime Minister’s vision, this is the time to take decisions and pursue reforms that will deliver a quantum leap for the sector and the national economy.”

CAPA further states that the second wave will limit domestic and international passenger belly capacity, which will be positive for cargo yields and freighter operators. CAPA estimates that IndiGo will induct freighter aircraft into its fleet, and possibly form an alliance with a global integrator, while SpiceJet may hive-off its cargo division and use this as a vehicle to raise capital.

The twin shocks of the first and second waves, occurring in the space of a little of over 12 months, will leave a long-term structural impact, CAPA warns. Supply-side risks have increased markedly, and were they to eventuate they would likely result in an imbalance in the competitive structure of the industry, possibly creating policy and regulatory challenges.

Despite a likely washout for much of 1HFY2022, CAPA estimates that domestic airline traffic for the full year will nevertheless be higher than the approximately 53 million passengers in FY2021. However, the impact will be more pronounced in the international sector which will be seriously impaired by travel bans and advisories announced by several countries on outbound Indian travellers. And it will take significant time to restore the confidence of inbound tourist and business travellers in India as a destination. Pre-Covid traffic is only expected to be restored by FY2024.

In FY2021, of the approximately 700 aircraft in the Indian airline fleet, around 300-350 aircraft (200-250 domestic and 100 international) were surplus to requirements. CAPA estimates that in 1HFY2022 an equivalent of at least 250-300 aircraft will continue to remain grounded.

The report further states, “The entire industry will report serious losses in FY2022, similar in scale to FY2021, with a serious downside risk in the event of a protracted second wave, or the emergence of a third wave. Many operators will struggle to recover from two consecutive years of such massive losses.

The severity and impact of the second wave will virtually close the door for most aviation businesses in terms of access to lenders, in the absence of government intervention, which is unlikely.”



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