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Wednesday, 06 December, 2017, 15 : 00 PM [IST]

Domestic airlines to trim losses by up to 90% this fiscal: Icra

As per a report in The Financial Express, the domestic airlines industry is expected to trim its aggregate net loss by up to 90% to INR 100 crore in FY18 from around INR 1,000 crore a year-ago period aided by expected strong peak season demand in the remaining half of this fiscal, ratings agency Icra said in a note on Tuesday.

The projections, however, do not include the financials of full service carrier Vistara and budget airline AirAsia India. It has to be noted that the loss is primarily on account Air India losses, while all other major airlines are expected to report profits during the fiscal ending March 2018, Icra said.

The study said the domestic travel demand moderated to 16.3% in the April-September period after having grown at above 20% over the last two years. Though the jet fuel prices remained higher during the first half of the current fiscal year-on- year, the ability of the airlines to pass-on the same supported the profitability of the industry during this period, it said.

“With peak season demand expected to be robust in H2FY18,the aggregate net loss of the industry is expected to reduce to around INR 500 million to INR 1 billion in FY18 from around INR 10 billion in the previous year,” Kinjal Shah, Icra assistant VP and co-head for corporate sector ratings said.

Significantly, Icra report comes on the day IATA projected a higher net profit of USD 38.4 billion for the airlines in 2018, primarily driven by strong demand. Healthy passenger load factors supported by a decline in competitive intensity due to moderation in capacity addition and suspension of operations of three regional airlines has augured well for the industry profitability, the rating agency said.

“This coupled with a gradual improvement in the core growth drivers like economic environment, tourism demand and regulatory support and a strong demand during the peak season is expected to support the industry profitability during H2FY18,” it said. In the last one year, regulator DGCA has suspended the flying permits of Air Pegasus, Air Costa and Air Carnival, all regional airlines following their failure to mop up required funds for carrying out operations. “All the major airlines are expected to report higher net profits in FY18 as compared to the previous year. However, with many of them having large capacity expansion plans, the debt level of the industry is expected to remain high in the medium term,” the Icra executive said.

Be cautious about privatisation of airports, says IATA chief flagging infrastructure challenges in the aviation sector, Alexandre de Juniac, IATA chief on Tuesday said governments should be cautious about privatising airports as “airport privatisation has not lived up to expectations”. Against the backdrop of many airports worldwide, including in India, grappling with slot issues, he emphasised that airports should be protected with “iron-clad regulation that prioritises the national interest”.

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