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ICRA sees rise in domestic passenger traffic

Our Bureau Mumbai | Updated on November 24, 2021

Estimates it at 82-84 per cent Y-o-Y in FY2022 against earlier projection of 71-73 per cent

Domestic passenger traffic has increased consecutively for five months after the slowdown witnessed in April and May 2021 due to the second wave of the Covid-19 pandemic. The easing of Covid restrictions by State governments, dip in new Covid infections, healthy pace of vaccination and pick-up in leisure travel have resulted in sequential domestic passenger traffic growth during June 2021-October 2021, with the same reaching 17.3 million in October 2021 (highest since the start of the pandemic in March 2020).

Domestic air traffic rises 31% in Aug to 66 lakh

The significant ramp-up in vaccination, decline in Covid-19 cases and pick-up in revenge leisure travel are supporting the growth in domestic passenger traffic. This is further supported by the recent decision of the Ministry of Civil Aviation (MoCA) to increase the domestic capacity deployment to 100 per cent of pre-Covid levels with effect from October 18, 2021.

Indian airlines fly high as August passenger traffic surges

Giving more insights, Rajeshwar Burla, Group Head, Corporate Ratings, ICRA, says, “As per ICRA’s base case scenario, the passenger traffic growth is now estimated at 82-84 per cent Y-o-Y in FY2022 as against earlier projection of 71-73 per cent Y-o-Y. This is factoring in the assumption that the impact of the third wave (if any) to be low due to mass vaccination. In the recently released tariff orders for some of the major private airports, Airports Economic Regulatory Authority (AERA) has acknowledged the adverse impact of Covid-19 pandemic on the airport operators.

No increase in tariff for FY2022

The true-up of traffic for FY2021 has been considered in current control period. Further, considering the impact of the second wave of pandemic on air traffic in Q1 FY2022, the regulator has decided not to increase the tariff for FY2022 as the sector is in the recovery phase and increase in tariffs had made with effect from April 1, 2022. Given the low traffic on one side and ongoing/upcoming capacity expansion plans at major private airports on the other side, the decision to continue with same tariff for FY2022 is expected to impact the airport operators temporarily.”

ICRA notes that due to Covid-19 pandemic, the ongoing capacity expansion plans at the major airports are expected to be delayed by 12 to 18 months. The completion cost is expected to increase due to increase in interest during construction (IDC) as some of the airports have funded capex with bullet bonds which have been drawn down at once.

Although the ramp-up in domestic passenger traffic has been steady since second wave of pandemic, ban on international commercial operations since March 2020 and the rise in Covid infections again in Europe and other international regions are expected to delay the recovery of international traffic. However, the same is expected to recover back to pre-Covid levels by FY2024.

Published on November 24, 2021

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