Air passenger traffic is expected to continue on recovery course and clock double-digit growth in fiscal 2024, riding on a pick-up in international and business travel, capacity expansion by airport operators, and higher availability of aircrafts. Following traffic volumes, cash flows of airport operators are also rebounding, leading to recovery in their debt service cushions.

Study is based on the top 4 airports - Delhi, Mumbai, Bengaluru and Hyderabad - which accounted for nearly 80% of air passenger traffic handled by private airports in India in fiscal 2022.

Says Ankit Hakhu, Director, CRISIL Ratings, “Air traffic volume at Indian airports is expected to grow over 70% and touch 325 million for full fiscal 2023. While this may still be a tad lower than the pre-pandemic levels, we expect the rising trajectory to continue. Air traffic volume is expected to rise further to over 380 million in fiscal 2024, which translates to a healthy growth of ~17% over fiscal 2023 levels (and ~11.5% over fiscal 2020 levels).”

This would be on back of a likely pick up in international travel with the removal of all pandemic-related restrictions and the opening up of economies worldwide. Additionally, business travel is also seen rebounding strongly with employees returning to office and corporates returning to business-as-usual mode.

Higher availability of aircraft and slots at airports will aid the growth, too. These issues had held back volumes during current fiscal to some extent. Aircrafts of select airlines had been grounded for some time during the year, for safety and inspection purposes, and have now come back in operations. Ongoing capacity expansions at leading airports will bring in new slots by providing infrastructure such as runways and additional terminal buildings.

Consequently, aeronautical revenues (comprising charges from passengers and aircrafts flying in and out of the airport and airlines parking at the airport among others) will see a sharp growth. Buoyed further by rise in aeronautical tariffs post capacity expansions at these airports¹, we expect aeronautical revenues to rise over 25% next fiscal from the levels seen in fiscal 2020. A similar growth is expected in non-aeronautical revenues² which forms ~50% of the airport’s overall revenue mix on the back of rising airport footfalls especially the high paying international ones and enhanced terminal capacities.

After factoring cost escalations, cash flows of private airports are expected to rise ~20% above fiscal 2020 levels in fiscal 2024. This will help preserve debt servicing cushion against rising debt servicing requirements, stemming from significant capacity expansion and the expiry of the moratorium on capex-related debt.

Says Varun Marwaha, Associate Director, CRISIL Ratings, “Though the pandemic had exacerbated the pressure on cash flows of private airport operators, their credit profiles were supported by the long concession life and strong market position, leading to expectation of recovery in debt protection metrics over the long run. Now, with the pandemic impact behind us, airport operators are seeing their debt-service cushion recovering towards the pre-pandemic long-term average of around 1.4 times.”

The projections remain sensitive to factors such as rising air turbine fuel prices, macroeconomic uncertainties, and geopolitical developments.

¹ Airports get a regulated return on capex done for constructing aeronautical assets. This return is charged largely in form of tariffs from passengers, cargo movements and airlines.
² Non-aeronautical revenue is from other activities, such as duty free, retail outlets, advertising, parking, commercial property development and rentals.