Domestic air traffic to drop by 15-17% in April: ICRA

With the recent spike in COVID cases, the recovery in domestic passenger traffic is expected to take longer than expected. After May 25, 2020, when airport operations resumed, domestic passenger traffic had reached 64% of previous year’s level in February 2021. In line with this trend, traffic was expected to grow by 125% in FY2022 after declining by 61% in FY2021.

But the fresh restrictions in several states are expected to raise a lot of apprehensions among passengers with respect to air travel. Moreover, domestic airports are also asking for negative covid-19 test reports for travel and imposing mandatory home quarantine measures. This is expected to negatively impact passenger traffic in April, and consequently impair airport operators cash flows and debt coverage metrics.

Shubham Jain, Senior Vice President, Corporate Ratings, ICRA, said, “The average daily number of departing passengers during March 2021 stood at 2.49 lakh. During April 6, 2021 to April 11, 2021 there has been dip of 11%-12% in domestic passenger traffic as compared to the average of March 2021. With the rising cases and the fresh restrictions imposed in many states till April 30, 2021, the air travel is likely to be curtailed to an extent and the domestic passenger traffic is expected be lower by 15%-17% M-o-M in April 2021.”

“Assuming Covid-19 infection rate subsides over the next few weeks with the support of mass vaccination programme and the restrictions by various states are lifted from May 2021, domestic passenger traffic growth is expected to be lower by 4%-6% during FY2022 than ICRA’s earlier estimates. The prolonged delay in recovery of second wave of Covid-19 could result in higher than expected decline in traffic estimates which in turn will have an adverse impact on cash flows and coverage metrics of the airport operators. However, the airport operators[1] are sitting pretty on huge cash balances estimated at around Rs. 5,700 crore as on March 31, 2021. This would support the credit profile of the operators in the near-term,” he added.