Air passenger traffic likely to rise 9% CAGR to 485 mn by FY27: Report

Air passenger traffic is likely to rise at a 9 per cent compounded annual growth rate (CAGR) between FY2025 and FY2027, taking the passenger volume to approximately 485 million by FY27, ratings agency CareEdge said on Monday.

International passenger traffic is likely to grow at a faster pace, supported by the induction of more wide-body aircraft from FY26, while the domestic passenger traffic may continue with its steady upward trajectory, expanding from a high base, it added.

The Indian aviation sector has experienced a V-shaped recovery, with passenger traffic reaching 1.10 times its pre-COVID levels in FY24, the rating agency said.

While the domestic air travel rebounded by FY23, the international traffic recovered in FY24, exceeding pre-COVID levels by 1.04 times, it noted.

The ratings agency earlier estimated passenger traffic to reach around 425 million in FY25. However, owing to the delays in aircraft deliveries and adverse weather conditions, pax growth is expected to be marginally lower by 4 per cent and reach around 410 million.

The increased air travel observed during the Mahakumbh in Q4 FY25 is likely to partially offset the low passenger growth for the remainder of the current financial year, CareEdge Ratings said.

"This surge (traffic growing at a CAGR of 9 per cent from FY25 to FY27) is driven by strong air travel demand and additional capacity creation by both airports and airlines. By FY27, passenger traffic is anticipated to reach approximately 485 million, reflecting the sector's strong recovery and growth trajectory," said Maulesh Desai, Director, CareEdge.

Noting that the domestic airport operators, including the Airports Authority of India, have invested approximately Rs 80,000 crore in capex from FY21 to the December quarter of this fiscal, CareEdge said that as much as 42 per cent of this investment was allocated to the development of greenfield airports across four locations.

The rating agency also projected a total capital outlay increase of Rs 30,000 crore during FY26- FY30, reaching approximately Rs 1.1 lakh crore. This growth will be primarily driven by brownfield airport expansions, creating funding opportunities of around Rs 75,000 crore.

Additionally, two greenfield airports, with a combined project cost of about Rs 25,000 crore, are expected to commence operations in the first half of FY26, it said, adding that 18 per cent of the total capex is allocated for city-side development (CSD) and non-aeronautical developments, highlighting efforts to enhance commercial and ancillary infrastructure.

Global successes, such as Singapore's Changi Airport, demonstrate the potential of CSD. Yet, given the relatively higher saleability risk associated with CSD, the pace of CSD capex and the corresponding revenue generation are key ponderable from a credit perspective, it said.

CareEdge Ratings estimates that the aero revenue of 11 private airports to grow at a CAGR of around 42 per cent over FY24-27.

Meanwhile, it said, non-aero revenues are expected to grow at a CAGR of around 12-14 per cent over FY24-FY27, driven by growth in revenue from duty-free, food and beverages, and lounges, the ratings agency said.

However, non-aero revenue per passenger for international peers is twice that of Indian airports, indicating significant headroom for growth in this segment, it added.

"The leverage of airports is expected to improve from FY25 onwards, supported by buoyancy in passenger volumes and tariff hikes at some airports," said Palak Vyas, Associate Director, CareEdge Ratings.