Mumbai airport may 'incur losses in near future' due to Covid impact: MIAL

MIAL's net loss in FY22 would have been higher had it included the annual fee payment - which is 38.7 per cent of revenues - to Centre-run AAI under its head 'total expenditure' of the balance sheet

The Mumbai airport, which is India’s second busiest, is likely to “incur losses in the near future” as its profitability has been severely impacted due to Covid-19, its operator Mumbai International Airport (MIAL) has stated in an internal assessment.

Adani Group-owned MIAL incurred a standalone net loss of Rs 177.17 crore in 2021-22 (FY22). By comparison, GMR Group-led Delhi International Airport, which manages India’s busiest airport in Delhi, incurred a standalone net profit of Rs 17.68 crore in FY22.

“The company (MIAL) may not have adequate profits during the next few years as company operations and profitability have been severely impacted due to the pandemic,” MIAL said in an internal document dated July 25, which has been reviewed by Business Standard.

Further, the Airports Economic Regulatory Authority has reduced aeronautical tariff for the Mumbai airport by 38.37 per cent from April 1, 2021, it said. Therefore, “the company is likely to incur losses in the near future”, it added.

MIAL did not respond to questions regarding its future assessment about losses until the time of going to press.

MIAL’s net loss in FY22 would have been higher had it included the annual fee payment — which is 38.7 per cent of revenues — to Centre-run Airports Authority of India (AAI) under its head ‘total expenditure’ of the balance sheet. 

When the pandemic struck in 2020, MIAL invoked the force majeure provision of the 2006 agreement with AAI, seeking relief from annual fee payment until the pandemic was over and the company was able to achieve the pre-pandemic passenger volume. The matter is currently under arbitration.

“Pending the final award of the arbitral tribunal, and the legal opinion obtained by the management, the company has not provided for its annual fee liability for FY22, and the amount of Rs 1,027.67 crore, transferred to AAI in accordance with the interim order of the tribunal dated December 22, 2021, is shown as an asset under the head ‘other non-current assets’,” MIAL stated in its annual statement for FY22.

It added that it is “excluding AAI annual fee” payment from being classified under the head ‘total expenditure’ of the balance sheet. 

The Mumbai airport handled 21.75 million passengers in FY22, which is significantly lower than its pre-pandemic peak of 48.83 million passengers in 2018-19. The airport was able to cut its annual loss by 46.7 per cent in FY22 to Rs 177.17 crore.

“FY22 was a very volatile year. First half of the year saw major restrictions being imposed by both foreign countries and the Indian government to curtail the spread of Covid, resulting in lower air traffic and passenger movement at the airport. Restrictions were gradually eased in the second half of the financial year,” noted MIAL.

2022-23 started with all restrictions being lifted by both foreign and Indian governments and air traffic movements and passenger growth poised to surpass pre-Covid years, it added.

According to aviation analytics company Cirium, the Mumbai airport in the ongoing month is handling about 5,552 flights per week, which is 22.4 per cent more year-on-year.

In July 2021, Adani Group took control of the Mumbai airport after purchasing a 50.5 per cent stake in MIAL from GVK Group. Adani Group currently owns 74 per cent stake in MIAL, while the remaining stake is with AAI.

MIAL is currently building the Navi Mumbai airport, which is expected to start operations by end-2024.

Adani Group currently manages seven functional airports in the country — Mumbai, Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati, and Thiruvananthapuram.