Tuesday, March 31, 2020

Airlines, hotels stare at uncertain future amid coronavirus spread: CARE

Mumbai: Aviation, hotel and media companies face an uncertain future because of the 21-day lockdown in the country and would require a bailout from the government immediately, analysts said. The aviation industry, which includes airports and their vendors and suppliers, might not fully recover soon from the impact of the coronavirus disease (Covid-19) pandemic.
In an outlook analysis of the coming financial year, rating firm CARE said domestic scheduled airlines, too, have started facing severe cash flow pressures as they are not allowed to fly till April 14, which has resulted in salary cuts for employees. Even after the nationwide lockdown ends, airline fares will remain low considering the lack of air travel demand and scaling down of certain routes, CARE said.
Passenger growth of airlines will fall sharply and might register a decline of 20-25 per cent in financial year 2020-21 (FY21), CARE said. This was in sharp contrast to the growth of 13.7 per cent in FY19 and 3.7 per cent in FY20 (till February). Given the fall in airline operations, airports are also likely to operate at less than 20 per cent capacity for April and at half capacity till June. This might result in a decline of 8-15 per cent in passengers handled (domestic and international) by airports.

In the case of hotels, CARE said, Covid-19 had already impacted March quarter revenues and as the lean season begins for both the business and leisure segments from April, firms will have some time to realign through cost rationalization and process improvement measures before the next peak season.
The operational parameters (occupancy rates and average room rates) of hotel players are expected to get adversely impacted in the next couple of quarters. Though a medium-term impact, this may lead to lower cash flows and, thus, exert pressure on profitability and liquidity.
31/03/20 Dev Chatterjee/Business Standard

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