Air traffic volumes are expected to touch 380 mn in FY2024.

Manish Gupta, Senior Director & Deputy Chief Ratings Officer, CRISIL Ratings

How do you assess the ongoing airport infrastructure developments in the country? What is your outlook on airports and aviation sector?

Infrastructure development is a focus area for the government, given the multiplier effect it has on economic growth. This theme runs across several government steps such as National Monetization Pipeline or privatisation of airports or new greenfield airports auctioned in the past. Driven by these steps along with capacity expansion by existing privatised airports, we expect an investment of around Rs 70,000 crores in the next five-year period, that is FY2024 to FY2028, as compared to the investment of around Rs 55,000 crores in recent five-year period of FY2019 to FY2023.

This current spurt in investments is on the back of the government push done in the past leading to projects underway and some deferment on account of Covid-19. This includes ongoing expansionary capex at Delhi, Bangalore, Ahmedabad, Lucknow and Hyderabad airports and greenfield projects like Navi Mumbai and Jewar Airport. Going forward, 25 airports identified by AAI to be privatized till 2025 as part of the National Monetization Pipeline are expected to see partial investments towards the end of the focus period.

Overall, air traffic volumes recovered to 96% of pre-pandemic levels towards the end of FY2023 (compared to FY2020 levels), with domestic recovery at 98% for the same period. Rising passenger trajectory is expected to continue in FY2024 and FY2025 with a 12-15% growth over FY2023 numbers on the back of pick-up in international and business travel along with capacity development by airport operators.

Implementation delays and risks in airport infrastructure need to be seen differently for greenfield and brownfield projects. Greenfield expansions may entail a reasonable amount of risk and get delayed on account of issues such as approvals and land availability. Brownfield expansions are generally of low complexity and have track record of being completed around time and cost budgets.

How do you see the airport infrastructure and aviation services in India with respected to the needs of passenger and freight transport?

Between fiscal 2015 and 2020, air traffic had logged a healthy compound annual growth rate of ~12%. Then the pandemic hit, and air traffic volume nosedived in FY2021. FY2022 saw only partial recovery (at 55% of fiscal 2020 traffic), given the multiple waves of infection and restrictions on movement of people. With the pandemic impact seemingly behind us, air traffic volumes for FY2023 grew by 73% as compared to previous year and stood at 327 mn. While, this may still be a tad lower than the pre-pandemic levels of around 340 mn, CRISIL Ratings expects the rising trajectory to continue and air traffic volumes to touch 380 mn in FY2024, driven by pick-up in international and business travel, growing penetration of air travel beyond metro cities on tailwind from government schemes such as RCS and UDAN, the inherent benefit of time saving in passenger air travel for distances over 500 km, among others. While certain airports were witnessing more than 90% capacity utilization before the pandemic, the capacity development plans by various airport operators is expected to support the rising passenger volumes going forward and utilization levels especially at the six metro airports are expected to be within 70-75% on aggregate basis next fiscal, with capacities coming onstream.

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