Logistics

Omicron impact: Aviation recovery estimates revised downward by ICRA

BL Mumbai Bureau | | Updated on: Jan 19, 2022
The aviation recovery trend in passenger traffic was disrupted due to Omicron.

The aviation recovery trend in passenger traffic was disrupted due to Omicron. | Photo Credit: SAMPATH KUMAR GP

ICRA moderates its FY2022 recovery estimates to 52% of pre-Covid level as against 62% earlier

Omicron is likely to disrupt domestic passenger traffic, according to ICRA. The credit rating agency has moderated its FY2022 recovery estimates to 52 per cent of pre-Covid level as against 62 per cent earlier. 

Domestic passenger traffic is likely to witness M-o-M de-growth of 40-42 per cent in January.

Strong rebound expected as compared to second wave of pandemic once the situation normalises.

Key factor for the disruption

The easing of restrictions by State governments, healthy pace of vaccination and dip in Covid-19 infections had resulted in healthy sequential domestic passenger traffic growth during June – December 2021 with the same reaching ~22 million in December 2021 (highest since the start of pandemic in March 2020) and ~88 per cent of pre-pandemic levels (December 2019). However, the recovery trend in passenger traffic was disrupted due to Omicron.

Giving more insights, Rajeshwar Burla, Group Head, Corporate Ratings, ICRA, says, “During January 1 to January 17, 2022, the domestic passenger traffic is lower by 34 per cent compared to December 1, 2021 to December 17, 2021. This is due to significant rise in the fresh infections on account of Omicron, which resulted in apprehensiveness to travel, imposition of localised restrictions in key States and consequent slowdown in leisure travel. Major domestic airlines have announced plans of reduction of capacity deployment due to lower demand. The domestic passenger traffic is likely to witness M-o-M de-growth of 40-42 per cent in January 2022 and 1517 per cent in February 2022 resulting in temporary slowdown in the recovery of domestic passenger traffic in Q4 FY2022. Overall, passenger traffic is expected to be lower by 40-45 per cent in Q4 FY2022 and the traffic recovery for FY2022 is moderated to 52 per cent of pre-Covid level as against our earlier estimates of 62 per cent of pre-Covid level.”

YoY growth for April-21 and May-21 is not given as airport operations were closed in April-2020 and till May 24, 2020.

Due to healthy recovery in passenger traffic post second wave impact and dip in Covid-19 infections, the Directorate General of Central Aviation (DGCA) in November 2021 had announced plans to allow resumption of scheduled international commercial operations from December 15, 2021. However, Omicron has forced the regulator to extend the ban on international commercial operations till January 31, 2022 and is expected to be further extended. Once restrictions are lifted, the recovery of international passenger traffic is expected to happen in a gradual manner and is expected to reach pre-Covid levels only by FY2024.

Outlook on the airport infrastructure

“The pace of passenger traffic recovery is expected to be sharp and much faster when compared to the second wave of pandemic. As for the airport operators, their strong on balance-sheet liquidity is expected to support their credit profile in the near term. However, the outlook on the airport infrastructure continues to remain Negative. ICRA expects domestic air travel to recover back to pre-Covid levels by FY2023 and the international sector by FY2024. This is factoring in the assumption that impact of future Covid waves (if any) to be low,” Burla added.

Published on January 19, 2022
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