NEW DELHI: Domestic air traffic is expected to reach pre-covid levels only by fiscal 2023 while international air traffic will see pre-pandemic normalcy by FY24 amid sluggish demand from leisure and business travellers, and a surge in new strains of coronavirus, rating agency Icra said in a report.
"Given that the domestic recovery is hampered by sluggish demand from leisure and business travel and the recovery in international travel is contingent on various government measures for control of Covid amid surgence of variants as well as success of mass vaccination, the domestic traffic is likely to reach pre-covid levels in FY2023 and international in FY2024," said Anupama Arora, vice president, Icra, in a statement.
“We expect passenger traffic to grow by around 133% in FY2022 and 14% in FY2023 after a contraction of 63% in FY2021," Arora said.
The recovery in domestic passenger traffic has been gradual, supported by an increase in capacity of airlines, travel during festival and wedding season.
As things stand, as of January, domestic passenger traffic was at around 61% of pre-pandemic levels and international passenger traffic at 23%, Icra said in the report.
"In 10M (first ten months of) FY2021, the aircraft traffic is lower by 60% Y-o-Y and the passenger traffic by72% Y-o-Y," it added.
A fresh spurt in coronavirus infections and renewed travel restrictions by some states could derail the fragile recovery in the domestic civil aviation sector. Adding to the woes of airlines is the rising prices of jet fuel, which makes up for the bulk of the cost of running an airline in India.
A total of 2,85,000 people chose to fly each day in the week ended 27 February, down from 3,00,000 per day in the previous week, ICICI Securities said in a report on the civil aviation sector on Monday. "With rising covid cases in the last few weeks, the possibility of another lockdown has increased, which is a threat to air traffic."
Meanwhile, Icra expects significant contraction in operating income (OI) of airports, as much as 60% Y-o-Y in FY21, due to the steep fall in traffic.
"Although the airport operators implemented various cost cutting measures, the decline in the OI and lower absorption of overheads is expected to result in operating losses at 32%. Recovery in traffic in FY2022 is expected to result in an increase in OI by 85%, but lower than FY2019-FY2020 levels," said Arora.
"While the (industry's) EBIDTA is expected to improve in FY2022, it is likely to remain moderate at 18%, when compared to historic levels of around 40%. Operating losses in FY2021 are likely to result in weak debt coverage metrics; however, liquidity remains adequate to meet debt obligations. Liquidity profile of airports would vary basis the extent of ramp up in traffic, ability to monetise real estate and their ability to secure timely refinancing," he added.
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