Rising crude oil prices, along with the impact of Covid’s second wave, have substantially increased the challenges for India’s airline sector, India Ratings and Research said.
“Ind-Ra believes challenges for the airlines sector have risen substantially,” the ratings agency said in India’s logistics sector.
“During January to mid-May 2021, Covid cases in key metros increased multifold. The top six metros account for a substantial proportion of the total domestic passenger traffic in the country.”
According to the report, the sharp spike in cases is leading to fresh restrictions on travel, economic and business activities in the form of lockdowns or reduced market hours.
“While the Central government is unlikely to close down airline operations or impose severe restrictions, passenger enthusiasm to undertake travel will be adversely impacted.
“Even after accounting for the planned ramp-up in India’s Covid vaccine production and delivery capabilities, substantial coverage is likely a few quarters away. Around 213 million doses of vaccines were administered by May 30, 2021,” it said.
As per the report, challenges for airlines are aggravated by a continued rise of crude oil prices with Brent crude breaching the $63 per BBL mark recently.
“Note that fuel prices form around 39 per cent of operating expenses for key airlines in India.”