While losses are expected to widen on a sequential basis, these would be lower on a year-on-year basis as air travel was suspended for two months till May 24, 2020.
InterGlobe Aviation, which operates IndiGo, will declare its result on July 27. SpiceJet is yet to announce its result date.
Broking firm Prabhudas Liladher expects IndiGo’s Q1 loss to widen sequentially to Rs 2,430 crore from Rs 1,160 crore on rising costs and lower yields. Adjusting for compensation from Boeing, SpiceJet’s loss will widen quarter-on-quarter to Rs 650 crore from Rs 380 crore, it said. Including compensation, SpiceJet had posted a loss of Rs 235 crore in Q4FY21.
“We expect IndiGo and SpiceJet each to report sequential dip in passenger load factor to 61% per cent and 69.5 per cent respectively,” Prabhudas Liladher said.
Air travel recovery stalled in May with the onset of second wave of the Covid-19 pandemic. States began introducing lockdown like measures and made RT-PCR tests mandatory for passengers. This curbed demand with airlines reducing number of flights. Average daily flights operated in May were down at 30-35 per cent of pre-Covid times. The average number of passengers per flight too, fell from 91 in April to 71 in May.
The total number of passengers flown by domestic carriers in May nosedived to 2.1 million from 5.7 million in April. The January-March period had seen 7.5 million passengers each month.
This, coupled with rising fuel costs ( 11 per cent Q-o-Q) and rupee depreciation ( 1.2 per cent Q-o-Q), will adversely impact airline earnings.
Domestic traffic is now recovering, but it is still far from pre-Covid levels. According to aviation sources over 3 million passengers flew in the first nineteen days of July whereas 3 million passengers flew in June. Yet despite signs of recovery challenges persist.
“Rising crude prices and rupee depreciation will further hurt aviation companies. However, hikes in the floor of fares in April and June will provide some interim relief to aviation companies as yields would improve. Cargo business is likely to improve further for both IndiGo and SpiceJet driven by demand.
Overall, we expect the losses for both the companies to widen QoQ in Q1FY22,” said Centrum Institutional Research.
Centrum estimates net loss of Rs 2,730 crore for IndiGo in Q1FY22, higher than net loss of Rs1,160 crore in Q4FY21, mainly on account of sharp fall in traffic (down 52 per cent QoQ), rise in aviation turbine fuel prices (up 12% QoQ) and rupee depreciation against the dollar.
It expects SpiceJet’s net loss at Rs 490 crore in Q1FY22, higher than Rs 240 crore in Q4FY21.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.