Expect domestic air traffic to return to pre-Covid level by FY23: ICRA

Expecting domestic air passenger traffic to return to the pre-COVID-19 level by the financial year 2022-23 and international by 2023-24, rating agency ICRA on Monday said there could be a delay in the commercialisation of expanded capacity by 9-12 months.

ICRA also said the cargo volumes are likely to grow around 36 per cent in 2021-22 and six per cent in 2022-23 after a 25 per cent contraction this fiscal, reaching pre-COVID-19 levels in 2021-22.

Domestic passenger traffic has reached around 61 per cent and international passenger traffic at 23 per cent of the pre-COVID-19 level in January 2021, ICRA said.

The aircraft traffic in the April-January period of 2020-21 was lower by 60 per cent y-o-y, while the passenger traffic was down by 72 per cent over the year-ago period, it said.

ICRA Vice-President Anupama Arora said the agency expects passenger traffic to grow around 133 per cent in 2021-22 and 14 per cent in 2022-23 after an expected contraction of 63 per cent in 2020-21.

She added that the domestic recovery is hampered by sluggish demand from leisure and business travel, and the recovery in international travel is contingent on various government measures for COVID-19 control amid surgence of variants as well as success of mass vaccination. "The domestic traffic is likely to reach pre-Covid levels in FY2023 and international in FY2024."

On the cargo front, volumes witnessed a faster recovery compared to passenger traffic as they reached 89 per cent of the previous year level in January 2021 with domestic cargo volumes reaching 91 per cent and international 88 per cent of the previous year, ICRA said.

This is due to the trade of essential supplies majorly in the pharmaceutical, medical equipment and agricultural produce sectors besides the expanding e-commerce business, said the ratings agency.

It said planned capital expenditure (capex) of major airports was around Rs 77,000 crore during 2020-24 prior to pandemic. However, the slower project execution and the significant decline in the traffic and the consequent revenues and cash flows resulted in the companies to preserve cash and defer the capex, it added.

"Significant contraction is likely in operating income (OI) by 60 per cent y-o-y in FY2021 due to the steep correction in the traffic levels.

"Although the airport operators implemented various cost cutting measures, the decline in the OI and lower absorption of overheads is expected to result in operating losses at 32 per cent " she said.

Recovery in traffic in 2021-22 is expected to result in an increase in OI by 85 per cent, but lower than FY2019-20 levels, Arora added.

While the Ebitda (earning) is expected to improve in 2021-22, according to Icra, it is likely to remain moderate at 18 per cent, when compared to be at a historic levels of around 40 per cent.

Operating losses in FY2021 are likely to result in weak debt coverage metrics. However, liquidity remains adequate to meet debt obligations, she said.

Liquidity profile of airports would vary basis the extent of ramp up in traffic, ability to monetise real estate and their ability to secure timely refinancing, Arora said.