Indian airlines profit may slip to $375 million in FY18, says CAPA

Indian Airlines may be heading for some turbulence as it has entered the last lap of this fiscal year. A conundrum has emerged over Indian airlines’ profit as ICRA earlier stated that companies would post better profits in FY18.  

India’s airlines are expected to report a consolidated profit of $350 million to $375 million in FY18, Kapil Kaul, South Asia CEO at CAPA Centre for Aviation says in Mumbai.

In the year ago period, airlines reported consolidated profit of $390.81 million.

ICRA said higher profits were estimated amounting to $481 million on the back of raising fares because of limited capacity addition in the domestic market.

“The increased ability of the airlines to pass on the costs to the customers due to reduced competitive intensity has resulted in improved financial performance of most of the airlines during the current year,” Kinjal Shah, vice-president at ratings company Icra Ltd, said in a report.

Kaul further added that airlines received an estimated compensation of $62 million -$78 million from original equipment manufacturers due to engine issues.

Market leader, IndiGo did not receive dozens of planes from Airbus as scheduled because of faulty engines on the A320neo aircraft. That affected its operations, but also brought windfall gains from engine makers Pratt & Whitney in compensation.

For Indigo, profit for the quarter ended September 30, 2017, almost quadrupled to Rs 551 crore or $85.2 million, on the back of compensation received from Pratt and Whitney engines.

Now India’s full-service carriers have been estimated to post a loss of $825 million-$850 million in FY18. Local carriers will add as many as 130 planes, including 30 regional aircraft in FY19, Kaul added.

The low-cost carriers like Air India Express, AirAsia India, GoAir, IndiGo and SpiceJet have been estimated by CAPA to reach or exceed 70% market share by March 31.