Domestic Air Passenger Traffic May Be Halved 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 , as per ratings agency ICRA.

The Air travel demand recovery is expected from FY22 and passenger traffic levels of 345 million recorded in the year ended March 2019 are likely to be surpassed only by FY23, 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.

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.

Subsequently, passenger traffic is estimated to witness a sharp YoY decline of 45-50 percent in FY21.

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.