This fiscal, private airport operators are expecting to see their traffic volume recover to the pre-pandemic level (fiscal 2020), with recovery in revenue supported by an increase in tariffs. In fiscal 2023, air traffic volume is expected to increase to the pre-Covid level of around 340 million passengers, a CRISIL report said. For the first five months (till August), the volume was around 88 per cent of the corresponding fiscal 2020 level and this is expected to pick up during the remaining months of the year. This will be courtesy factors like improving business travel sentiment, pent-up demand on the international segment, and de-bottlenecking of capacity availability on aircraft and international slots. “This fiscal, traffic volume is expected to recover to the pre-pandemic level, implying a robust growth of ~75 per cent over the fiscal 2022 level. The pick-up is expected to be led by domestic traffic as slots and routes on the international front are still opening up,” said Manish Gupta, Senior Director, CRISIL Ratings.
Between fiscal 2015 and 2020, air traffic had registered a healthy CAGR of 12 per cent, due to growing penetration of air travel beyond metro cities on the back of government schemes such as RCS and UDAN, the benefit of time saving in passenger air travel for distances over 500 km, and focus on infrastructure development. This nosedived in fiscal 2021 when the pandemic hit. And later, during fiscal 2022 there was only partial recovery of 55 per cent of fiscal 2020 traffic, given the multiple waves of infection resulting in movement restrictions of people.
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The revenue recovery is crucial at this time to support rising debt-servicing requirements as these airports are at the end of their expansion phase. “In the first five months of this fiscal, domestic traffic stood at 92 per cent of the corresponding fiscal 2020 mark, while international traffic was at 75 per cent. This cements our confidence for healthy volume growth in the current fiscal and a return to near-double-digit growth next fiscal,” said Manish Gupta.
Also, the rise in aeronautical tariffs by 30 per cent for the top 4 private airports will help aeronautical revenue reach 120 per cent in fiscal 2023. Non-aeronautical revenue, meanwhile, is recovering towards 90 per cent of the quantum in fiscal 2020 for this year. As a result, revenue of the private airports is expected to be 105 per cent and 130 per cent of fiscal 2020 revenue in fiscal 2023 and 2024 respectively, CRISIL report said.
“We expect the debt-service cushions to be maintained close to long-term averages of around 1.4 times (similar to pre-pandemic levels) and thus do not see any material impact on the credit quality of these operators. Additionally, the airports benefit from a long remaining concession life (of over 35 years) compared with debt tenure (of around 10-18 years), which enables them to refinance debt and manage debt obligations,” said Ankit Hakhu, Director, CRISIL Ratings.
The revenue improvement positions the operators well to withstand the debt-servicing requirements in fiscal 2023 and 2024 at 25 per cent and 115 per cent higher respectively, in comparison to fiscal 2020.