Due to escalating traffic, private airports in the country are poised to experience a 30% surge in their topline this fiscal year, a report stated on Thursday.
With the rise in passenger volume, airports are projected to witness an increase in both aeronautical and non-aeronautical revenues.
What did the report mention?
According to a report by credit rating agency Crisil, aeronautical sources encompass fees gathered from passengers, airlines, and cargo operators for the utilization of infrastructure. Non-aeronautical sources, on the other hand, comprise revenue streams such as advertising, retail, lounge services, and duty-free shops.
It is anticipated that approximately two-thirds of the increase in airport revenue will stem from aeronautical sources, representing a year-on-year growth of 45%, as stated in the report.
The reason behind this is that nearly half of the airports included in the Crisil Ratings study are expected to implement a predetermined increase in their aeronautical tariffs by an average of 25%.
The agency stated that an anticipated rise of approximately 10% in passenger traffic on the high base of the previous fiscal year, along with tariff hikes linked to capital expenditure and increasing non-aeronautical revenue per passenger, will contribute to the growth of revenue for leading private airport operators by around 30% this fiscal year.
The report is derived from a study of 10 private airports, collectively representing an estimated 60% of the overall passenger traffic in FY24., it added.
The increased revenue is expected to restore the cushion for debt servicing to approximately 1.4 times, returning it to the level last observed before the COVID-19 pandemic. During this period, airports had utilized their cash reserves to service debt.
Ankit Hakhu, Director of Crisil Ratings, stated that building upon the robust foundation of the previous fiscal year, the growth in passenger traffic is expected to sustain momentum into fiscal 2025, increasing by more than 10% to surpass 415 million.
He observed that sustained economic growth, coupled with the expansion of airport infrastructure and enhancements in regional connectivity, are fostering the favorable conditions for the growth of domestic air traffic.
On the international front, the increasing business travel demand and the relaxation of visa requirements for countries such as Malaysia and Vietnam, resulting in reduced wait times for visa applications to Western Europe, along with enhanced connectivity to Western and Southeast Asia, are significant advantages, he added.
Aeronautical tariffs are regulated to ensure that airports have the necessary cash flow to service the debt availed for aeronautical capital expenditure and to provide a return on equity for the operator.
The report highlights that airports embarked on substantial expansion projects during the pandemic, doubling their capacity in anticipation of the current surge in passenger volume. The current increase in aeronautical tariffs is being implemented to offset the costs associated with these capacity expansions.
The remaining one-third of the revenue growth will be propelled by non-aeronautical sources, representing a year-on-year growth of 15%, it added.
(With inputs from PTI)