Budget domestic airlines IndiGo and SpiceJet incur expect to report heavy losses of around Rs 2,670 crore & Rs 1,000 crore, respectively, during the quarter due to the operational disruptions and other low fixed cost coverage during the disruption in airline services, as per reports.
Regular and domestic airline operations had remained shut for two months from March 24th to May 24th as a safety measure on account of the national lockdown to curb the spread of Covid-19. However, some specified carriers, including SpiceJet, IndiGo, and Air India, continued with cargo operations under the LifeLine Udan Scheme of the government.
Brokerage firm Centrum Broking (1) stated that they expected a net loss of Rs 26.7 billion for IndiGo and SpiceJet in the first quarter of FY’21 due to the low traffic volume, low fleet utilization, and poor coverage of fixed costs.
IndiGo to retire its CEO fleet
IndiGo and SpiceJet are looking forward to hastening the retirement of their older narrow-body fleet to rationalize their capacity due to the current demand disruption. The report also stated that both would be looking to lower fuel burn and maintenance costs. IndiGo targets to retire its fleet of 120 aircraft in the CEO (current engine option) fleet over the coming two years.
IndiGo estimated that such measures would help them generate additional liquidity of Rs 3,000 to 4,000 crore by the end of the year.
SpiceJet would also be looking to retire its fleet of NG aircraft, as per the report.
Capacity caps that are driven by the constraints imposed by the states on flight movements. The average daily departures grew from 478 in the first week of resumption of services, to 759 in the sixth week, as compared to the pre-corona domestic departures that went up to 3,000 per day.
Currently, there has been no clarity in the resumption of international flight operations by the authorities.