Private airport operators to invest Rs 42k cr on capacity expansion

02 Sep 2021 CW Team

Ratings agency CRISIL told the media that private airport operators in India are likely to invest around Rs 42,000 crore in FY26 for airport capacity expansion, with a focus on long term growth.

The expense would be double the capital expenditure (capex) they acquired in the last five financial years.

As per CRISIL, the potential in capex derives from the strong long-lasting fundamentals and regulated tariff structure, which provides pass-through of capex costs and keeps the risks low.

Before the pandemic, private airports were at a great pace, operating at more than 115% of their design capacity. With a design capacity of 150 million passengers, it was around 175 million.

The high operating movement was because of the strong annual growth of more than 8% in air traffic between FY16 to FY20.

The massive hit took place in FY21 when the pandemic began following the economic slowdown leading to traffic nose-diving by nearly 65%. The ongoing fiscal also began with a more destructive second wave of Covid-19. However, the economic improvement chances look better with the easing infection rate, increase in vaccinations, and infrastructure development.

The rating agency revealed that the economic growth outlook stays strong, and GDP is estimated to grow at nearly 7.4% CAGR in the coming four years FY22 to FY25.

Ankit Hakhu, Director at CRISIL Ratings, told the media that the air traffic of India increases much faster than the GDP. He said a robust 8.5% yearly air traffic growth in the country airports till FY26.

It would result in an additional 190 million passengers flying pan India by FY26 over the pre-pandemic base of FY20 of 340 million passengers. It would drive the total traffic to nearly 530 million passengers by fiscal 2026.

From the total, private airports are likely to manage nearly 70% (375 million passengers) in FY26, over around 50% from FY20.

By FY26, strong growth in demand could maintain utilisation rates of these airports around 100%.

The firm informed that airports earn from non-aero services as well, and by FY24, an increase in passenger travel and economic recovery would help this revenue rebound by 50%.

Image Source

Also read: Indian airlines likely to record Rs 26k cr net loss in FY22: ICRA

Also read: Govt plans to monetise 25 AAI airports in next four years

Ratings agency CRISIL told the media that private airport operators in India are likely to invest around Rs 42,000 crore in FY26 for airport capacity expansion, with a focus on long term growth. The expense would be double the capital expenditure (capex) they acquired in the last five financial years. As per CRISIL, the potential in capex derives from the strong long-lasting fundamentals and regulated tariff structure, which provides pass-through of capex costs and keeps the risks low. Before the pandemic, private airports were at a great pace, operating at more than 115% of their design capacity. With a design capacity of 150 million passengers, it was around 175 million. The high operating movement was because of the strong annual growth of more than 8% in air traffic between FY16 to FY20. The massive hit took place in FY21 when the pandemic began following the economic slowdown leading to traffic nose-diving by nearly 65%. The ongoing fiscal also began with a more destructive second wave of Covid-19. However, the economic improvement chances look better with the easing infection rate, increase in vaccinations, and infrastructure development. The rating agency revealed that the economic growth outlook stays strong, and GDP is estimated to grow at nearly 7.4% CAGR in the coming four years FY22 to FY25. Ankit Hakhu, Director at CRISIL Ratings, told the media that the air traffic of India increases much faster than the GDP. He said a robust 8.5% yearly air traffic growth in the country airports till FY26. It would result in an additional 190 million passengers flying pan India by FY26 over the pre-pandemic base of FY20 of 340 million passengers. It would drive the total traffic to nearly 530 million passengers by fiscal 2026. From the total, private airports are likely to manage nearly 70% (375 million passengers) in FY26, over around 50% from FY20. By FY26, strong growth in demand could maintain utilisation rates of these airports around 100%. The firm informed that airports earn from non-aero services as well, and by FY24, an increase in passenger travel and economic recovery would help this revenue rebound by 50%. Image Source Also read: Indian airlines likely to record Rs 26k cr net loss in FY22: ICRA Also read: Govt plans to monetise 25 AAI airports in next four years