Budget carrier IndiGo's decision to retrench 10 per cent of its total workforce owing to the impact of the coronavirus pandemic is the beginning of a painful process and in the prevailing conditions, the possibility of one or more airlines going out of business cannot be ruled out, according to CAPA India.
Besides, third-party investors are unlikely to invest in any airline under the present conditions, and the companies have the only option to seek capital infusion from the promoters, it said.
IndiGo, which is the largest carrier by domestic market share, on Monday said it plans to hand over pink slips to 10 per cent of its around 23,500-strong workforce amid lack of demand due to curtailed travel restrictions.
The decision by @IndiGo6E to lay off 10 per cent of its staff is the beginning of a painful process for Indian aviation as things start to unravel from the impact of #COVID19India. It will be impossible to survive this crisis without a strong balance sheet (for the domestic airlines), CAPA India said in a tweet on Tuesday.
In another tweet, it said industry conditions are such that one or more airline failures appear inevitable.
Airlines have limited options to turn to for funding except their promoters, given that third-party investors will be reluctant to provide capital right now, and the government is unwilling to do so, it further said in the tweet.
Projecting losses to the tune of Rs 1-1.3 lakh crore over the financial years 2020-22 for the domestic airlines, CRISIL Research last week said curtailed mobility of people due to the pandemic and related restrictions will squeeze domestic air passenger traffic by 40-45 per cent in 2020-21.
The rating agency had added that international traffic will drop by 60-65 per cent, in the current financial year.Also Read: Rahul Bajaj to step down as Chairman of Bajaj Finance; stock plunges over 6%