With passenger traffic at airports to remain very low during H1FY2021 due to COVID-19 and on a full year basis it is expected to decline by 45-50% in FY2021, the profitability and cashflow of airports would come under pressure according to ICRA.
The setback on the aviation infrastructure industry is expected to be substantial in the near term and FY2019 passenger traffic levels of 345 million may be surpassed only by FY2023, it said.
Anupama Arora, sector head and vice-president, Corporate Ratings, ICRA, said “There prevails considerable uncertainty in air traffic recovery timeline in the wake of subdued demand for air travel for leisure (especially international) by risk averse passengers and likely decline in disposable income in the hands of consumers.”
“Moreover, factors like dip in business travel due to subdued global macroeconomic environment, increasing use of virtual communication modes by business community and possible continuation of travel restrictions, in some form, by various countries have also significantly influenced the overall scenario,” she said.
With an almost negligible air traffic in April and May, possible dilemma among travellers to travel amidst continuing pandemic fears and gradual addition of capacities by airlines, passenger traffic at airports is expected to remain under pressure for H1FY2021, with some recovery only likely in the second half, she said.
Airports in India handled around 345 million passengers in FY2019, with 10-year CAGR of 12% (except for FY2013) over FY2009-2019, driven by strong growth especially in domestic traffic (CAGR of 14% over the same period).
The top five privatised airports in India (Delhi, Mumbai, Bengaluru, Hyderabad and Kochi) developed under Public-Private Partnership model have lead from the front, accounting for 55-60% of this passenger traffic.
Given likelihood of weak traffic for a prolonged period and resultant operations conducted at sub-optimal capacities and at the same time necessity to invest in infrastructure to ensure passenger safety and meet preventive requirements against the pandemic, the airports’ profitability and cashflows are likely to remain under pressure in the near term, ICRA said.
This risk is further exacerbated in case of the privatised airports, as most of them are in the midst of undertaking sizeable debt-funded capex to expand capacities, it added.
“Thus far, the underlying business position of the privatised airports has been supported by their strategic importance and sizeable share in the country’s total air traffic; and adequate liquidity profile for most, with sizeable fund availability,” Ms. Arora said.
“However, a prolonged impact of the pandemic on the operations of these airports, in the absence of any meaningful support from key stakeholders, is likely to result in moderation of their credit profile and liquidity position, which may take some time to restore,” she added.
