Reporter : Wu Jiaqian / http://www.minhangshi.com/m/h5/detail/9270359 / Translation, editing : Gan Yung Chyan, KUCINTA SETIA
News (1)
Indian airlines prepare for transformation
Like airlines around the world, last year was a year that Indian airlines wanted to forget: considering the disruption of flights caused by the CCP virus pandemic, the average daily air passenger volume in India was about 270,000, which was lower than 40 in 2019. 10,000 passengers, and high-yield business aviation passenger traffic has not yet recovered. In addition, international aviation is almost completely paralyzed.
News (2)
Heavy losses throughout India's civil aviation industry
India’s entire aviation industry suffered heavy losses. The country’s leading airline IndiGo posted an operating loss of 11.9 billion rupees (US$163 million) in the second quarter of fiscal 2021, and revenue fell by 65%. Its smaller competitor, Spice Jet, suffered an operating loss of Rs 10.6 crore in the same quarter. Although this actually improved from an operating loss of Rs 4.6 crore in the same period last year, the company attributed the improvement in performance to its handling of cargo. Business promotion-wise, the quarter's revenue fell 62% year-on-year.
After the announcement of Spice Jet’s results, HSBC believes that despite the company’s liquidity problems and weak balance sheet, given that its performance in the second quarter of this fiscal year was much better than expected, this is a struggling Spice Jet. Providing much-needed breathing space, HSBC added that the support from its aircraft leasing supplier and the receipt of compensation related to the Boeing 737 MAX is good news for Spice Jet.
Non-listed operators are not having a hard time. Singapore Airlines disclosed in its second quarter financial report for fiscal 2021 that the operating rate of Vistara, a joint venture with India’s Tata Group, was only 55 of its domestic capacity before the CCP virus pandemic. %, the load factor is only 60%.
At the same time, long-term loss-making Air India seems to have finally begun to seriously consider selling. In view of the fact that the troubled company failed to arouse much interest from the buyer in the past few years, the company has relaxed its selling conditions. The previous condition was that the buyer was required to bear the huge debt of INR 230 crore for Air India. Now, the bidder can make an offer to the operator and negotiate the amount of debt that it hopes to bear. That is, the bid is composed of equity and debt. Air India also gave up its desire to retain 24% of its shares.
News (3)
Tata now majority stake holder in AirAsia India
In the past few years, Air India’s idea of getting the Indian government to increase its stake has discouraged bold potential bidders. Ratan Tata, the founder of Air India, is seen as the main candidate for the state-owned airline. In addition, the company recently acquired a 32.7% stake in AirAsia India from Malaysia's low-cost airline company AirAsia for US$37.7 million, thereby increasing its share of AirAsia India to 83.67%. Currently, AirAsia is selling its various stakes to raise new capital and focus on its core ASEAN market.
News (4)
Indian airlines face three major challenges
This year, the Indian aviation industry will face three major challenges: vaccination against SARS-CoV-2, the battle for survival of small airlines, and the integration of airlines. In the new year, government regulators will continue to play a leading role, and the domestic air traffic in India will continue to recover, and may create conditions for the long-term profitability of the industry.
Currently, Indian air operators are still only allowed to operate 80% of their fleet. Although this ceiling has been steadily increasing since the middle of last year. Analysts expect that this ceiling will be lifted in the next few months. In addition, the Indian government has set an air fare price range. Analysts believe that the setting of capacity restrictions and price ranges aims to prevent stronger airlines from launching vicious competition in the market and weed out weaker competitors.
News (5)
SARS-CoV-2 vaccination is key to recovery of Indian aviation industry
India has a population of nearly 1.4 billion. Vaccination against SARS-CoV-2 will be a daunting task, and this work will begin in the near future. Airlines will play a key role in the distribution of both vaccines. One of the novel coronavirus vaccines is from AstraZeneca and the other is produced locally in India.
AmbitCapital analyst Valenginodia pointed out that although the covi vaccination has not yet begun, people are still willing to fly, "India is a vast country, and the population is very unevenly divided. Vaccinating everyone with the new crown virus will be a long process. This process will not be completed soon, so the direct impact of vaccination against the new crown virus It will be more reflected in people’s confidence and sentiment in travel. For Indian airlines, what is more critical is when the government will finally abolish the 80% fleet capacity limit, and the demand for air travel may come. At the end of this year, it will be fully restored to the level before the covid pandemic.”
Ansuman Deb of ICICI Securities believes that for air traffic to fully recover, business travel needs to be restarted. As of now, the recovery of air traffic in India has mainly relied on low-income leisure travel.
News (6)
Small Indian airlines face a battle for survival, GoAir and Spice Jet facing liquidity challenges
The Indian aviation market has always caused severe losses with brutal competition, and the most irrational participant in the competition is Indian Airlines. Except for IndiGo's outstanding performance in profit growth, other airline operators are basically struggling to break even. Although the collapse of India's second largest jet airliner two years ago eased part of the pressure of excess capacity and created new opportunities for Indian airlines, the covid epidemic has pushed the Indian aviation industry back into crisis mode. Although there will be some losses, airlines with large fleets, strong financial backing, or both, such as IndiGo, Air India, AirAsia India, and Vistara should be able to weather the crisis but analysts have questioned the viability of the small airlines Spice Jet and GoAir.
Statistics from the General Administration of Civil Aviation of India show that in November last year, Spice Jet only accounted for 13.2% of the Indian airline passenger market share, while IndiGo accounted for 53.9%. Both of them got rich Tata. Air India and Vistara supported by the group accounted for 6.6% and 6.3% respectively. Deb of ICICI Securities pointed out that both Spice Jet and GoAir are facing liquidity challenges.
Banks may be reluctant to provide large amounts of loans for them in the form of credit. Both airlines also have typical supplier payments that need to be paid such as payments to the air leasing suppliers. According to Cirium's fleet data, Go Air's fleet has 57 Airbus A320s in service or in storage, all of which are leased while Spice Jet's fleet has 102 aircraft, mainly Boeing 737NG and Bombardier 8 -Q400, except for the 13 Q400s it directly manages, the rest of the aircraft are leased. A market observer pointed out that, given that there is no market for the recovered aircraft, most aviation leasing companies have expressed tolerance for late lease payments last year.
However, if the global domestic aviation market starts to rebound this year and generates more demand for airlines operating narrow-body aircraft, then whether it is from India or the world, airlines with weaker financial strength may find that air leasing companies are no longer willing to defer payment.
News (7)
Airline integration possible in India
When discussing this year's Indian aviation market, one cannot fail to mention the topic of integration. In a sense, the integration has started at the end of last year, and Tata Group has increased its share in AirAsia India. However, the biggest consolidation this year may come from Air India.
Tata Group originally founded Air India in 1946. In January last year, the Indian government, the current owner of Air India, stated that it was looking for buyers interested in Air India and Air India Express. This is a huge change compared to 2017, when the Indian government only offered 76% of the shares of Air India as the target of the sale, and did not receive any applications from bidders. This time, it will discuss the mode of cooperation with qualified bidders privately, without giving a specific timeline. Tata Group’s interest in Air India has long been reported, and analysts believe that the Indian government’s decision to abandon more cumbersome bidding requirements will pave the way for the deal. But even so, this transaction process may take several years.
Ambit's Ginodia believes that if Tata Group acquires Air India, it will merge Air India and Vistara to create a large-scale and high-quality airline that provides high-quality routes and space services. In addition, the group may also merge AirAsia India and Air India Express to create a separate low-cost airline to compete with competitors in India and provide key international flight services for major hubs such as New Delhi and Mumbai. "In the next two to three years, I think three airlines will survive. IndiGo will be ranked first, with a market share of 55%; the second will be the airlines under the Tata Group, accounting for 20%~25% of the market share; the third place may be Spice Jet."
However, Ansuman of ICICI Securities added, “In view of the different cultures and history of different airlines, although these integrated airlines will eventually stabilize and enter the market, Tata Group will face daunting integration challenges. They don’t do short-term work, so if they are committed to buying Air India, I think they will participate in it for a long time.” After eliminating an irrational competitor, in addition to integration, it may also bring a certain degree to the Indian aviation market. The reasonableness of the fare. In the mid to late 2020s, an integrated and rational Indian aviation market may eventually become a profitable and actively developing business field.
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