Air traffic volume may recover to pre-pandemic level in FY23: CRISIL

Air passenger traffic volume is expected to recover to the pre-pandemic level, implying a robust 75 per cent year-on-year growth this fiscal, a media report said on Monday.

According to the domestic credit rating agency, CRISIL, a pick-up in traffic volume is expected. With the pandemic impact seemingly behind us, the air traffic volume is expected to increase to the fiscal 2020 level of around 340 million passengers in FY23.

The volume is expected to pick up in the remaining 2022 because of improving business travel sentiment, pent-up demand on the international segment and de-bottlenecking of capacity availability on aircraft and international slots, it said.

"In the first five months of this fiscal, domestic traffic stood at 92 per cent of the corresponding fiscal 2020 mark, while international traffic was at 75 per cent. This cements our confidence for healthy volume growth in the current fiscal and a return to near-double-digit growth next fiscal," said Manish Gupta, Senior Director at CRISIL Ratings.

The improvement in revenue positions the operators well to withstand the debt-servicing requirements in fiscal 2023 and 2024 — at 25 per cent and 115 per cent higher, respectively, compared with fiscal 2020, the report added.

"We expect the debt-service cushions to be maintained close to long-term averages of around 1.4 times, similar to pre-pandemic levels, and thus do not see any material impact on the credit quality of these operators. Additionally, the airports benefit from a long remaining concession life (of over 35 years) compared with debt tenure (of around 10-18 years), which enables them to refinance debt and manage debt obligations," said Ankit Hakhu, Director, CRISIL Ratings.

The air traffic between fiscal 2015 and 2020 logged a healthy compound annual growth rate of around 12 per cent, driven by growing air travel penetration beyond metro cities on tailwind from the government schemes, such as RCS and UDAN1 and focus on infrastructure development, as per the report.

According to CRISIL, fiscal 2022 saw only partial recovery given the multiple waves of infection and restrictions on the movement of people. The aeronautical tariffs have increased by around 30 per cent for the top four private airports, which will help aeronautical revenue reach 120 per cent in FY23.