Indias Aviation Set for Strong Growth: Air Passenger Traffic Expected to Rise 8-11 percentage Says ICRA

ICRA has stated that India's airport operators and aviation stakeholders may see good times ahead, as overall air passenger traffic is expected to grow by 8-11% in this fiscal year, reaching around 407-418 million passengers.

Vinay Kumar G, Vice President & Sector Head, Corporate Ratings, ICRA, explained that the recovery of India's airport passenger traffic is one of the best compared to other major global markets. In 2023, India accounted for 4.2% of global passenger traffic, an increase from 3.8% in 2019.

Kumar also highlighted that while global passenger traffic recovered to just 96% of its pre-COVID levels in 2023, Indian airport passenger traffic rebounded to 106% of pre-COVID levels. This strong recovery is attributed to robust economic growth and the addition of new airport routes. India's air passenger traffic is expected to outperform global trends.

The Airports Economic Regulatory Authority (AERA) sets tariffs at major airports across the country, with rates determined for a five-year period, known as the control period (CP). Over the last four-to-five years, the regulatory regime for airports has matured, reducing delays in implementing tariff orders. The time taken to implement these orders has decreased to less than 1.5 years for the third CP, compared to 3-3.5 years during the first and second CPs.

Progress has also been made in resolving long-standing issues such as the cost of equity, return on security deposits, forex losses, and the treatment of real estate income. The difference between the capital expenditure (capex) proposed by operators and what was approved by the regulator has narrowed from 25-30% during the first two CPs to around 10% in the third CP.

Kumar commented on the performance of airport operators, stating that revenues for ICRA’s sample set of airports are likely to grow by around 15-17% year-on-year in FY2025. This growth is driven by sustained improvements in both domestic and international passenger traffic, tariff increases at some major airports, and a ramp-up in non-aeronautical revenues.

Kumar is confident that airports will maintain healthy debt coverage metrics. Despite higher interest expenses and debt repayments due to the commercialisation of capex programs at key airports, the profitability margins are expected to remain strong. The credit profile of airport operators is projected to stay robust, supported by healthy accruals and comfortable liquidity.

For students, this information is valuable because it highlights how the aviation industry in India is growing rapidly. This growth could lead to more job and career opportunities in the airport and aviation sectors.