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Air passenger traffic may decline 45-50 per cent in FY21: ICRA

Air passenger traffic in the country is expected to remain under pressure for the first half (April-September) of the current fiscal, with the full year passenger volume likely to go down by about half despite some recovery in H2 FY21, ratings agency Icra said on Wednesday.

PTI PTI
Mumbai Updated on: June 03, 2020 21:29 IST
Air passenger traffic may decline 45-50 pc in FY21: ICRA
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Air passenger traffic may decline 45-50 pc in FY21: ICRA

Air passenger traffic in the country is expected to remain under pressure for the first half (April-September) of the current fiscal, with the full year passenger volume likely to go down by about half despite some recovery in H2 FY21, ratings agency Icra said on Wednesday.

Recovery in air travel demand in a meaningful manner is expected towards FY2022 and passenger traffic levels of 345 million recorded in the year ended March 2019 are likely to be surpassed only by FY2023, it added.

It also said the aviation infrastructure industry is amongst the most severely impacted by the COVID-19 crisis and the setback is expected to be substantial in the near term.

"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 macro-economic 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," said Anupama Arora, Sector Head and Vice President at Icra.

The decline in air travel globally following the spread of the pandemic and subsequent measures to deal with it including the lockdown and the near closure of airport operations, has led to a sharp contraction in air traffic in the March quarter of the previous fiscal.

Although most airports resumed operations by the fag-end of May for domestic travel, with restrictions on number of flights as well as passengers, the resumption of international commercial operations remains stalled, it said.

"With almost negligible air traffic already in the first two months of the current fiscal, possible dilemma amongst 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," said Arora.

"As a result, passenger traffic is estimated to witness a sharp Y-o-Y decline of 45-50 per cent in FY2021," she added.

Given the 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 cash flows 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 said.

"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.

"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," Arora added.

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