Recovery of air passenger traffic only after H2 FY21, says ICRA

Passenger traffic at Indian airports will remain under pressure during the first half of financial year (FY) 2021 and a recovery is likely only during the second half of the fiscal, credit rating agency ICRA said in a report on Wednesday.

According to the report, passenger traffic at airports across the country is estimated to decline by 45%-50% during FY 2021 due to the fallout of coronavirus outbreak.

"There prevails considerable uncertainty in the 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," said Anupama Arora, Sector Head & Vice President – Corporate Ratings, ICRA.

"Moreover, factors like dip in business travel due to the subdued global macroeconomic environment, increasing use of virtual communication modes by the business community and possible continuation of travel restrictions, in some form, by various countries have also significantly influenced the overall scenario," Arora added.

According to the ICRA report, recovery of passenger traffic at Indian airports will be contingent on the abatement of the pandemic, with international travel primarily dependent on lifting of travel restrictions by various countries, which will likely to happen only in phases.

"Additionally, availability of viable load factors across specific routes for the airlines would be another consideration for airlines to resume traffic directed towards various destinations. Thus, ICRA expects the traffic recovery in a meaningful manner only towards FY2022 and that FY2019 passenger traffic levels are likely to be surpassed only by FY2023," the report added.

India’s aviation industry is staring at an uncertain future despite the government allowing gradual resumption of domestic flights from 25 May, after being grounded since 25 March, as the coronavirus outbreak is likely to keep passenger sentiment subdued after an initial pent-up demand.

According to the latest estimates by industry lobby group International Air Transport Assosiation (IATA), Indian airlines are likely to suffer a revenue loss of $11.2 billion due to grounding of their operations as a result of the lockdown to contain covid-19. Passenger demand is expected to fall 47% annually, while millions of aviation jobs will be at risk.

Airports in India handled around 345 million passengers in FY2019, with a ten-year CAGR of 12% (except for FY2013) over FY2009-2019, driven by strong growth especially in domestic traffic.

The top five privatised airports in India comprises airports at New Delhi, Mumbai, Bengaluru, Hyderabad and Cochin, developed under Public-Private Partnership (PPP) model, which have accounted for 55-60% of this passenger traffic.

"However, passenger traffic growth had declined considerably in the initial months of FY2020, primarily attributable to grounding of major airline - Jet Airways and subdued macro-economic environment. Subsequent onset of tourist/festive season and discounted fares offered by airlines had led to some recovery," the ICRA report said.

"However, there was a sharp contraction in Q4 FY 2020, because of the aforementioned pandemic, which resulted in an overall traffic growth decline of 1% in FY 2020," it added.

Source:https://www.livemint.com

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