After a year of unprecedented disruption, caused by COVID-19, Mumbai International Airport Ltd (MIAL) is finally seeing "some light at the end of the tunnel," its Chief Executive Officer Rajeev Jain said in an interview.
"We are optimistic as two vaccines have been cleared and the roll-out will happen soon. Also, passengers no longer have the fear of travelling," Jain told Moneycontrol.
While passenger loads were just at about 20 percent when domestic flights resumed in May, said Jain, occupancy has improved. Industry observers now put average passenger loads at a range of 55 to 60 percent. Overall passenger traffic has continued to grow, increasing by 22 percent in December from a month ago.
Jain expects domestic air passenger traffic to maintain its gradual recovery and reach pre-COVID-19 levels by the end of 2021. International travel, however, may take longer and may not 'normalise' before 2023.
For MIAL, which had asked for a moratorium on interest payment and had deferred payments to vendors and employees, the recovery in passenger traffic has enabled it to "get back to track on financial obligations, including payments on contracts and salaries to employees," says Jain. It continues to keep a close watch on capital expenditure, having deferred up to 45 percent of the spend to over next two years.
The company, which operates the country's second-largest airport, is at present undergoing a debt restructuring exercise, which Jain said will be in "place soon." Debt restructuring was necessitated as the airport didn't have enough cash to service its financial obligations.
The restructuring may well coincide with the change in its promoters. In August 2020, the Adani Group acquired 74 percent stake in the Mumbai airport, in the process buying out stakes of GVK Group - which ran the airport - and other investors. "The clearances are in place. The transition is about to be completed," Jain said.
The financial recovery could be a long one, the veteran noted, as the pandemic has dealt a blow to economic growth.
Unprecedented damage
Jain has seen many a boom and bust in his career spanning over three decades. Like in 2008, just two years after Jain joined Mumbai International Airport Ltd as President, the airport for the first time saw a drop in passenger traffic after the global economic slowdown.
"But it was minimal and India recovered fast. The disruption by COVID-19, however, was unprecedented," says Jain, who has been leading the country's second-largest airport since 2011, when he took over as its Chief Executive Officer.
Airport operations were immediately impacted as, the CEO points out, 80 percent of the costs are fixed. Even though MIAL had kept only its Terminal 2 operational, there were expenses related to use of utilities such as electricity and security. On the other hand, revenue dried up when the lockdown was announced in March and flights operated got suspended.
The Vande Bharat Mission repatriation flights and cargo operations meant that even as the airport remained functional, low footfalls dented revenue. The impact has been telling.
- MIAL expects to end the 2021 FY with a 71 percent drop in overall traffic.
- Cargo volumes to be down 32 percent.
- Aero revenues are expected to be down by 56 percent.
- Non-aero revenues to drop by 77 percent.
- Cargo revenues are expected to see a 7 percent dent.
- Overall, revenue will be down 58 percent.
A 'significant number' of retailers at the airport have shut shop. For the rest, MIAL is negotiating rentals, after having given relief on payments till December 31, 2020. "This may be extended up to March," Jain said.
Till now, the retailers either paid MIAL a minimum guarantee every month, or shared their revenue with the operator. "For many outlets we have shifted to revenue-share model. Thus we are also shouldering their risk," Jain said.
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