CAPA presented a very grim picture of the sector, forecasting a ~40% slump in demand during FY21E, excess plane capacity running up to a third, and a cost spiral as a fallout of the mandatory social distancing that may last up to a year. They also forecast that the industry would take at least two years to fully recover with smaller players potentially going under as the government is likely to extend only very limited support. Leading players may be able to leverage their clout to negotiate permanently lower lease rentals in addition to a moratorium.
The global aviation activity tumbled 67% in March with India also seeing a dramatic fall. Apart from cargo and charter flights, all other operations stand suspended. CAPA pegs domestic PAX traffic to fall by ~40% to 80-90 million during FY21E from 140 million, and similarly international PAX traffic to fall to 35-40 million during FY21E from 60 million. It expects the lockdown on domestic travel to be lifted not before June 1 and on international not before July 1. CAPA expects PLFs of 50-60% and normalcy not before Q4 given social distancing norms.India currently has a total fleet of 650 planes, almost all of which are grounded. CAPA forecasts that it shall take at least 12 months for India to utilise the fleet. Hence, Q1 is likely to be a washout. CAPA forecasts a fleet requirement of 300-325 during Q2 for domestic operations and 100 for international operations, resulting in a surplus of 200-250 aircraft by the end of Q2. Hundred aircraft could retire as they were up for lease renewal or were old and anyway about to be phased out. Besides, airlines would need a plan for the 200+ scheduled aircraft deliveries; these deliveries are likely to be deferred by 1–2 years.
01/05/20 Edelweiss/Financial Express
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The global aviation activity tumbled 67% in March with India also seeing a dramatic fall. Apart from cargo and charter flights, all other operations stand suspended. CAPA pegs domestic PAX traffic to fall by ~40% to 80-90 million during FY21E from 140 million, and similarly international PAX traffic to fall to 35-40 million during FY21E from 60 million. It expects the lockdown on domestic travel to be lifted not before June 1 and on international not before July 1. CAPA expects PLFs of 50-60% and normalcy not before Q4 given social distancing norms.India currently has a total fleet of 650 planes, almost all of which are grounded. CAPA forecasts that it shall take at least 12 months for India to utilise the fleet. Hence, Q1 is likely to be a washout. CAPA forecasts a fleet requirement of 300-325 during Q2 for domestic operations and 100 for international operations, resulting in a surplus of 200-250 aircraft by the end of Q2. Hundred aircraft could retire as they were up for lease renewal or were old and anyway about to be phased out. Besides, airlines would need a plan for the 200+ scheduled aircraft deliveries; these deliveries are likely to be deferred by 1–2 years.
01/05/20 Edelweiss/Financial Express
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