Two major headwinds – crippling infrastructure constraints at major airports, and an uptick in fuel prices – are likely to impact passenger growth in the domestic sector in the next few years, Crisil said in a report.
Crisil Research said due to the twin factors, growth would decelerate 800 basis points (bps) to 13-15% annually in the five fiscals through 2022, compared with a 22% growth seen in fiscals 2016 and 2017. This fiscal, it is seen slowing 300-500 bps to 17-19%, Crisil said.
Low fares on account of declining oil prices had propelled domestic passenger traffic in the past two fiscals, but now with rising crude oil prices, fares are expected to go up and this would moderate passenger traffic growth.
Prasad Koparkar, senior director, Crisil Research said, “The bigger problem, however, is the severe congestion at airports metastasizing into structural gridlocks. Mumbai and New Delhi airports [63% of domestic passenger traffic either originate or terminate at these two airports] are edging towards capacity crunch during peak hours, which is amplifying the infrastructure constraints.”
‘Space crunch’
Mumbai’s airport has no space for expansion and capacity utilisation at Hyderabad and Bengaluru airports have already crossed the 100% mark. As a result new flights are not allowed permission.
Binaifer Jehani, director, Crisil Research said, “Over the long term, significant investments in airport infrastructure are necessary to help the industry grow faster. We expect infrastructure constraints to deteriorate in the medium term.”
Crisil said such constraints have also impacted operations under UDAN, the regional connectivity scheme (RCS) of the government.
“As of October 2017, Alliance Air, SpiceJet and TruJet had commenced operations in 28 of the 128 routes allocated under Phase I of RCS,” it said.
“But there is dearth of infrastructure at RCS airports, and new carriers such as Air Deccan and Air Odisha are facing teething troubles,” it added.
