ICRA revises outlook on Indian airport infra to stable from negative

Credit ratings agency ICRA on Thursday revised the outlook on Indian airport infrastructure to 'Stable' from 'Negative' amid expectations that passenger traffic will surpass pre-pandemic level between September this year to August next year.

It also estimates that domestic passenger traffic will reach pre-COVID levels by the March quarter (Q4FY23 vs Q4FY2020) this fiscal year, while the international traffic is expected to see full recovery in the second quarter of fiscal year starting April 2023.

The overall recovery in domestic traffic remained strong and is expected to recover to 97-98 per cent of pre-COVID levels in FY2023 itself, ICRA said.

Driven by healthy momentum in domestic traffic as well as an uptick in international passenger traffic, overall passenger traffic is expected to witness a growth of 71-73 per cent year-on-year and reach 324-327 million (95-96 per cent of pre-COVID levels) in FY2023, according to the ratings agency.

The overall passenger traffic may reach 90 per cent of the pre-COVID (similar period in FY2020) levels in September, it said.

The ratings agency noted that after the resumption of international commercial operations from March 27 this year, post a two-year ban, this traffic has registered a steady improvement in the last six months which is supported by the opening of major international destinations, easing of travel restrictions and increase in aircraft capacity deployment.

ICRA said it expects international passenger traffic to cross pre-COVID levels in FY2024.

According to Rajeshwar Burla, Group Head for Corporate Ratings at ICRA, "given the uptick in economic activity as well as the expected traffic ramp-up in the coming months ahead of the festive and the vacation season, the passenger traffic is expected to sustain a healthy growth momentum."

The outlook revision to Stable from Negative reflects ICRA's expectation that passenger traffic is expected to surpass pre-COVID levels in the ensuing 12-month period (Sep-22 to Aug-23), he said.

Supported by an improvement in the overall revenue and consequent operating leverage benefits along with the increase in tariff (for some major airports), the cash flows available for debt servicing and debt coverage metrics are expected to witness a gradual improvement going forward, Burla said.