Due to the crippling effects of the second COVID-19 wave in India, air traffic is predicted to drop in the 2022 fiscal, and the total recovery will only be possible by the fourth quarter of the following year, Indian analytical company CRISIL said in a report. However, despite modest debt servicing requirements, robust business models and healthy liquidity covers will sustain airport operators’ credit quality this fiscal year.
CRISIL’s forecast is based on a study of India’s top four private airports — Delhi, Mumbai, Bengaluru, and Hyderabad, which handled 90% of all air passenger traffic and 50% of all air traffic in the previous fiscal year.
The lockdowns across regions, night curfews, and other restrictions on people’s movement during the second wave have affected India’s air traffic. The airport passenger traffic has plummeted, with average daily domestic passenger traffic falling by half in May 2021 from February 2021, or to just 10% of pre-pandemic levels in May 2019.
The second wave will delay the resurgence of business travel and the increase in foreign traffic, which accounts for more than half of all traffic. In this context, CRISIL now projects traffic volumes to be 60% of fiscal 2020 levels this fiscal year, with a return to pre-pandemic levels occurring only in the fourth quarter of fiscal 2023.
However, the traffic volumes are projected to rebound once the current affliction curve begins to flatten. Domestic traffic increased significantly when the airport reopened in May 2020, with overall passenger traffic reaching 60% of fiscal 2020 by February 2021, or less than nine months after the first domestic travel alert. Given the current vaccination campaign, the government’s push to minimize the economic damage, and the recovery trajectory seen in nations that have recovered from the second wave, there is a hope for considerably speedier recovery for India.
CRISIL estimates revenue loss for airports
Normalization in India is still not envisaged until the fourth quarter of fiscal 2023. There will be a loss of revenue of Rs 900 crores in fiscal 2022, compared to the pre-second wave projection of Rs 7500 crores, according to CRISIL ratings.
Due to the excellent business models and healthy liquidity buffers, a drop in sales will not impact airport credit profiles. Furthermore, these airports are located in major cities, which will experience a rapid recovery of traffic and revenue as the economy recovers.