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Recovery slower-than-expected for airport operators

India Ratings & Research (Ind-Ra) says that the five airports managed by private sector concessionaires (JV airports) have witnessed negative yoy growth in domestic passenger enplanements for the first time since recovering from the global financial crisis (2008-2009).

September 20, 2013 / 06:00 PM IST

India Ratings`s research report on Airports- Performance


Negative Growth in Private Sector Airports: India Ratings & Research (Ind-Ra) says that the five airports managed by private sector concessionaires (JV airports) have witnessed negative yoy growth in domestic passenger enplanements for the first time since recovering from the global financial crisis (2008-2009). The five airports are Delhi International Airport (DIAL); Mumbai International Airport (MIAL, „IND BBB+/Stable); Bengaluru International Airport (BIAL), GMR Hyderabad International Airport (GHIAL, „IND A-/Stable) and Cochin International Airport (CIAL).


Combined domestic enplanements of all the five airports declined by 6.88% to 60.68 million in FY13, though the pace of decline varies at different airports. DIAL witnessed the steepest decline (negative 9.27%), followed by BIAL (negative 8.27%), CIAL (negative 7.97%), GHIAL (negative 5.5%) and MIAL (negative 3.64%).


Negative Growth in State-run Airports: Domestic enplanements in major government-run airports in Chennai, Kolkata, Ahmedabad and Goa also declined 5.27% yoy to 22.97 million in FY13 on a combined basis. The major decline was seen at Ahmedabad airport, down 15.33% yoy to 3.34 million in FY13.


Short-term Decline: The decline in domestic enplanements is primarily driven by the overall slowdown of the domestic economy. However, the decline may appear a short-term phenomenon considering that the said airports together witnessed a positive CAGR of 14.44% in domestic enplanements during FY09-FY12 post the global financial crisis.


Slow Recovery: Ind-Ra believes that the recovery will be slower-than-expected by most airport operators. Demand for domestic air travel will be affected by airlines‟ recent moves to increase fares significantly to adjust to high costs.


Growing International Enplanements: Notwithstanding the steep decline in domestic traffic, all the airports saw growth in international enplanements. Combined international enplanements of the JV airports and government-run airports grew at a CAGR of 8.33% and 7.20%, respectively, during FY09-FY13 to reach 29.07 million and 7.58 million.


Airlines Affecting Airports’ Performance: The weak financial position of several airlines is casting its dark shadow over airports. Recent sharp increases in the prices of aviation turbine fuel, rapidly depreciating rupee, higher airport charges and increasing service taxes have had a significant impact on the cost structures of beleaguered airline operators.


Following the cessation of operations of a leading private carrier in October 2012, media reports suggest that another major domestic airline has been placed on “cash and carry” mode by the airports. According to a recent report by Capa-Centre for Aviation, the debt of Indian airlines increased 8%-9% yoy in FY13 to an estimated USD14.5bn.


Increasing Receivables: Persistent weakness in airlines‟ credit profiles is likely to cause airports to carry higher and increasing receivables and limit their flexibility in raising aeronautical revenue. The increasing growth rate of passenger enplanements, though dependant on a rebounding of the economy, is also linked to airlines‟ ability to expand their businesses.

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first published: Sep 20, 2013 06:00 pm

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