Thursday, January 07, 2021

More Indian airlines could face bankruptcy in March when suspension of law is lifted: Report

Mumbai: One or more Indian carriers may head to the National Company Law Tribunal once the suspension of the bankruptcy law is lifted at the end of March, said the Centre for Asia Pacific Aviation (CAPA), an aviation consultancy firm. On Monday, the firm released a list of trends to watch out for in 2021.

To help businesses hit by the pandemic, the government had suspended the Insolvency and Bankruptcy Code last year, and later extended the suspension to March 31, 2021. Without significant recapitalisation, atleast one Indian carrier, if not more, will head towards bankruptcy.

The other big trend would be “consolidation” . “Consolidation is inevitable and will be strategic in nature. It could result in a 2-3 airline system in the near term,’’ said the CAPA 2021 trends report, adding that Air India’s privatisation is likely to be successful by the end of 2021. The Indian airline sector will be completely private then. Tata Sons will increase its shareholding in AirAsia India from its recent 84% to 100%, it predicted.

“The structure of competition may change in the near to medium term, possibly resulting in a two-horse race in both the airline and airport sectors. Following the privatisation of Air India, the airline sector is likely to be dominated by two major players, with a combined domestic market share of around 75-80%. The acquisition of Mumbai and Navi Mumbai airports by Adani Airports may result in a two-horse race emerging in the private airport sector. These developments will necessitate a strengthening of competition and consumer protection regulations,’’ said CAPA.

Domestic traffic in FY2022 is expected to reach 70-80% of FY2020 levels. But this does not factor in the possibility of industry consolidation and supply-side risks. Discretionary domestic travel segments, which accounted for an estimated 55% of the market pre-Covid, are are unlikely to return until the pandemic is under greater control or deployment of a vaccine is widespread, it said. International traffic is only expected to recover to 35-40% of FY2020 levels. FY2022 is expected to be another year of large losses for the industry, especially airlines. The cap on airfares imposed by the government in May last year might continue to the first half of 2021, CAPA said.

07/01/21 Times of India

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