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ICRA maintains negative outlook on Indian aviation industry in wake of coronavirus outbreak

28 Feb 2020 Evaluate

Ratings agency ICRA in its latest report has maintained its negative outlook on the Indian aviation industry in the wake of coronavirus outbreak, which has resulted in many international passengers cancelling their travel to South East Asian countries. It said the suspension of flights on the India-China sector will not result in any significant impact on the financial performance of the airlines, unless the lockout is prolonged, as the traffic on these routes account for only 0.9-1.3 percent of the total international passenger numbers.

However, the rating agency said the impact is expected to be severe if passengers from other South East Asian countries, hit by coronavirus, cancel their travel. It also said that traffic from these countries account for around 19.5-23.8 percent of the total international passengers flying to and from India. But, it said the extent of impact of the flight/ ticket cancellations on the profitability of the domestic airlines would vary depending on the airlines' presence in these routes.

ICRA said the medium-term impact on the domestic aviation industry would also depend on the economic shock to the global economy due to the coronavirus outbreak. It said historically, foreign airlines have enjoyed high market share while domestic airlines account for less than 40 percent of the total passengers carried on international routes to and from to India. It added that decline in jet fuel prices would partly compensate airlines' loss of revenues due to flight cancellations.

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