Private airport operators are expected to experience a 30% increase in their revenues according to a recent study conducted by CRISIL Ratings. This surge is attributed to an anticipated 10% rise in passenger traffic, built upon the strong base of FY24. Moreover, the increase will be bolstered by tariff hikes linked to capital expenditure and an uptick in non-aeronautical revenue per passenger.

“The rising revenue will restore the cushion for debt servicing to around 1.4 times, taking it back to the level last seen before the Covid-19 pandemic. Airports had dipped into their cash reserve to service debt during this period,” it states.

The study focused on 10 private airports, which collectively account for approximately 60% of the total passenger traffic in FY24. Ankit Hakhu, director at CRISIL Ratings, highlighted that this growth trend is expected to continue in fiscal year 2025, with passenger traffic exceeding 415 million.

Hakhu says, “Taking off from the strong base of last fiscal, passenger traffic growth will continue its momentum in fiscal 2025 and rise more than 10% to over 415 million. Continuing economic growth, opening of more airports and improving regional connectivity are providing the tailwinds necessary for domestic traffic growth.”

On the international front, factors such as increasing business travel, relaxed visa requirements for destinations like Malaysia and Vietnam, streamlined visa application processes for Western Europe, and improved connectivity to Western and Southeast Asia are contributing positively to the sector.

Approximately two-thirds of the revenue growth for airports is anticipated to originate from aeronautical sources, which include fees from passengers, airlines, and cargo operators. This prediction stems from the fact that nearly half of the airports examined in the CRISIL Ratings study are set to implement a predetermined 25% average increase in their aeronautical tariffs. This growth is supported by regulated aeronautical tariffs that allow airports to manage their debt obligations and generate returns.

Additionally, non-aeronautical sources, such as retail, food and beverage, real estate leasing, and advertising, are expected to contribute to the remaining one-third of revenue growth.

Varun Marwaha, associate director at CRISIL Ratings, says, “The recovery in the revenue growth trajectory — after three years of decline led by the pandemic— comes at the right time to support the increasing debt obligations of private airport operators arising from the significant expansion during the pandemic period. With the projected increase in revenue, the debt cover of operators is expected to recover to 1.4 times, a level last seen before the pandemic between fiscals 2018 and 2020.”

The projections remain sensitive to factors that can hamper air traffic growth such as a material worsening in aircraft availability, it adds.

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