The domestic passenger traffic which witnessed a steady ramp up post resumption of airport operations from May 25, 2020, reaching 64% of the previous year levels in February 2021 has again suffered a setback. As per ICRA note, the spike in Covid-19 infections towards March-end and April 2021 has resulted in several state governments implementing fresh restrictions, resulting in marginal de-growth in traffic in March 2021 (-0.7% M-o-M) compared to February 2021 (+1.4% M-o-M). The average daily number of departing passengers during March 2021 stood at 2.49 lakh; and declined by 28% M-o-M in April 2021 to 1.79 lakh.  There was a further dip of 56% during May 1, 2021 to May 16, 2021, compared to the average of April 2021.

Giving more insights, Mr. Shubham Jain, Senior Vice President, Corporate Ratings, ICRA, says “In addition to the passengers being apprehensive for air travel, increase in infections forced many state governments to implement strict covid-19 restrictions during last two months on air travel. The second wave of Covid-19 infections is likely to delay recovery in traffic. The passenger traffic growth is now estimated at 80%-85% Y-o-Y in FY2022 as against our earlier projection of 130%-135% Y-o-Y. This is factoring in the assumption that majority of population (above 18+ years) will be vaccinated by December 2021, in line with the GoI’s vaccination policy targets, and impact of third wave (if any) to be minimal due to mass vaccination. ICRA expects domestic air travel to recover back to pre-Covid levels by FY2023 and the international sector by FY2024.”

EXHIBIT 1: MoM Growth In Domestic Passenger traffic

Source: AAI, ICRA research; *domestic operations were closed from March 25, 2020 – May 24, 2020

The international traffic remains limited to countries with special flights under the Vande Bharat Mission (VBM) rescue operation flights and bilateral ‘Air Transport Bubble (ATB)’ agreements. Many countries like the US, the UK, Singapore, Kuwait, France, Canada, Australia, Iran, Indonesia and the UAE, which had ATB arrangements or under the VBM, have temporarily banned flights from India, citing the increasing coronavirus infections.

The major growth drivers for the sectors in the near term will critically hinge on the success of mass vaccination, lifting of lockdown restrictions, resumption of business travel and improvement in leisure travel.

EXHIBIT 2: YoY Growth Trends In Overall Passenger Traffic

Source: AAI, ICRA research

“The operating income (OI) and operating profits for FY2022 are estimated to decline 12% and 40% to Rs. 12,800 crore and Rs. 2560 crore respectively, as compared to earlier estimates due to revision in traffic. However, on Y-o-Y basis, OI is estimated to increase by around 50% with operating margins of 20% as against losses in previous year. With the improvement in the operating margins and the consequent cash flows in FY2022, the interest coverage and DSCR are expected to improve to 1.3x and 1.1x respectively (as against earlier estimates of 2.4x and 1.5x). Slow ramp up in traffic would affect the cash flows available for debt servicing for airport operators adversely. However, the robust on-balance sheet liquidity of Rs. 5400 crore[1] for the airports is strong to meet the debt obligations and support the sector in near-term,” Mr. Jain added.