As a surge of coronavirus infections again disrupts travel across India, the country’s airlines are under renewed pressure to raise cash or risk downsizing. Amid the uncertainty, the board of IndiGo Airlines (6E, Delhi Int'l) parent InterGlobe Aviation met on May 7 to consider the option of raising equity. It approved the move on Monday, May 10.

In a brief May 7 stock exchange filing, InterGlobe said, without disclosing further details, that “the board decided that the company should continue to explore all options to increase its liquidity, including by way of a qualified institutions placement (QIP),” in other words a share sale to institutional investors. It then approved an INR30 billion rupee (USD409 million) fund raising through a QIP.

It was only in January when a quick recovery in the domestic travel sector looked assured, that the comparatively cash-rich carrier decided against previously announced plans to raise up to INR40 billion (USD545 million).

Now, however, passenger traffic in India is plummeting, down 29% in April from March, with daily passenger traffic in May well below 100,000, according to the Ministry of Civil Aviation. An unnamed source told Reuters that IndiGo’s cash burn may now rise to USD3.4 million a day, a level last seen in September, from USD2 million a day at the end of 2020.

InterGlobe had therefore considered raising enough cash to cover about two quarters of cash burn, namely between USD540 million and USD680 million, the source alleged.

Recovery in domestic travel demand is now expected to occur later than previously anticipated, local media reported - not by the end of 2021, but in the first quarter of 2022 at the earliest. Several countries with which India has had bilateral arrangements to operate charter flights have restricted arrivals due to high infection rates, including the United Kingdom, the United States, and Germany, India’s Bureau Of Immigration said in a statement in late April.

India’s government has so far refrained from providing much in the way of support to the aviation sector, so the country’s privately-owned airlines will likely have to turn to the private sector, local media speculated.