Neelam Mathews

Center for Aviation’s (CAPA) June 24 India Outlook brought bad tidings for airlines on the subcontinent as the forecast predicted the sector will not likely return to profitability until after 2023. For still grounded Jet Airways, which received clearance to launch operations by the National Company Law Tribunal on June 22, the planned restart appears fraught with uncertainty.

 


In October last year, a consortium led by UK-based asset management Kalrock Capital&nbsp;and UAE-based businessman Murari Lal Jalan won the bid for the airline.

 


The decision to revive Jet Airways comes as Indian airlines struggle to barely survive by slashing fares aggressively. CAPA projects that Indian airlines will lose $4 billion this year and $4.1 billion next year. In 2022, airlines will lose $47 per passenger compared with $11 in 2020. “How will a ‘new’ entrant like Jet sustain itself? &nbsp;Working capital needed to fund losses will be immense,” a senior airline official told AIN. “Even if they surmount hurdles, putting deposits on aircraft, hiring people, and more, the first six months will be critical. They can’t expect a quick ramp-up of loads. But if you cancel, reliability suffers.”

 


The possibility of a third wave of Covid-19 infection carries further financial risks. “Indian airlines have the highest cost structure and lowest fares,” said CAPA India and Middle East CEO Kapil Kaul. “Airlines will require over $5 billion of recapitalization just to survive the impact of the two Covid waves. It would have been better to liquidate Jet Airways.” &nbsp;

 


Rohit Tomar, managing director of Caladrius&nbsp;Aero Consulting, agreed. “The time is not right to launch an airline,” he said. “Passenger traffic is down and Jet cannot compete with Tata-SIA-owned Vistara, which has set standards of a full-service carrier. Also, [Jet enjoys] no economies of scale that its competitors have. The possibility of Jet surviving in the next five years is remote.” &nbsp;

 


The consortium has said it will put into service about 20 narrowbodies, inducted in phases starting mid-2022. According to CAPA, airlines will face higher expenditures in 2022 as fuel costs touch around $100 and the Indian rupee further depreciates.

 


The consortium is also negotiating terms over the acquisition of three Airbus A330 freighters. Unfortunately, cargo revenue tonne kilometers among Indian airlines have fallen 50 percent compared with pre-Covid levels and IndiGo and SpiceJet remain entrenched in the sector. “Cargo yields have been very good overall for the past 12 months,” noted IndiGo CEO Ronojoy Dutta. “But at this point, they seem to be flattening a little.”

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