India’s largest airline by market share IndiGo – owned by InterGlobe Aviation – has approved to raise Rs 4,000 crore to tide over the liquidity crisis resurrected by Covid-19 pandemic. In contrast, its competitor SpiceJet has been shown a red flag by its auditor, doubting the airline’s continuity as ‘going concern’.
This poles-apart situation of the two airlines, which collectively controlled 69.4 per cent of the aviation market as of June 30, 2020, according to data provided by Directorate General of Civil Aviation (DGCA), has put brakes on the growth story for the sector which was once seen as the world’s fastest growing markets.
Despite the Covid-19 pandemic that nearly halted the operations of the airlines, analysts say the Indian aviation sector holds promise from a long-term perspective and that the macro-economic factors remain conducive.
“Economic structure for the aviation space is conducive for airlines to grow in India. The sector is a significant contributor towards India’s services sector as a whole. Besides, an average middle class family had begun to switch to airways before Covid-19 hit the world. That said, the only reason why most of the airlines have struggled to operate profitably in India is due to volatile crude oil prices, which may remain subdued in the short to medium term due to the deflationary pressures created by Covid-19,” explains G Chokkalingam, founder and chief investment officer at Equinomics Research.