Air passenger traffic won't recover anytime soon

The second wave of the coronavirus pandemic is likely to delay recovery in air passenger traffic with an 80-85 per cent growth year-on-year this fiscal against the earlier estimate of 130-135 per cent, ratings agency ICRA said on Monday.

The domestic passenger traffic, which witnessed a steady ramp-up after resumption of airport operations since May 25 last year and reached 64 per cent of the previous year levels in February, has again suffered a setback, the ratings agency said in a report.

The spike in coronavirus infections towards March-end and April has resulted in several state governments implementing fresh restrictions, resulting in a marginal 0.7 per cent de-growth sequentially in traffic in March.

This is as compared to February when passenger traffic grew 1.4 per cent month-on-month, it said.

The average daily number of departing passengers during March 2021 stood at 2.49 lakh; and declined by 28 per cent m-o-m in April to 1.79 lakh.

There was a further dip of 56 per cent during May 1 to May 16 as compared to the average of April, according to the report.

ICRA senior vice president (corporate ratings) Shubham Jain said that in addition to the passengers being apprehensive for air travel, increase in infections forced many state governments to implement strict COVID-19 restrictions during the past 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 per cent y-o-y in FY2022 as against our earlier projection of 130-135 per cent y-o-y," Jain said.

He added that this is factoring in the assumption that majority of the population (above 18+ years) will be vaccinated by December, in line with the central government's vaccination policy targets, and the impact of third wave, if any, to be minimal due to mass vaccination.

ICRA expects domestic air travel to recover back to pre-COVID-19 levels by FY2023 and the international sector by FY2024, he added.

"The operating income and operating profits for FY2022 are estimated to decline 12 per cent and 40 per cent to Rs 12,800 crore and Rs 2,560 crore, respectively, as compared to earlier estimates due to revision in traffic," Jain said.

The international traffic remains limited to countries with special flights under the the Vande Bharat Mission (VBM) rescue operation flights and bilateral air transport bubble agreements, ICRA said.

Many countries, including the US, the UK, Singapore, Kuwait and France, that had such the bubble pact with India under the VBM, have temporarily banned flights from India, citing the increasing coronavirus infections, it said.

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, ICRA noted.

However, on a y-o-y basis, operating income is estimated to increase by around 50 per cent with operating margins of 20 per cent as against losses in the previous year, as per the ratings agency.

With the improvement in the operating margins and the consequent cash flows in the current financial year, the interest coverage and debt service coverage ratio 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, said Jain.

"However, the robust on-balance sheet liquidity of Rs 5,400 crore for the airports is strong to meet the debt obligations and support the sector in the near term," he added.

Photograph: ANI Photo