Now or never for reforms

The following extracts from CAPA India’s Airport Outlook FY2022 reveal that Indian airports will need to shift to airline driven and passenger-centric business models in which they will have to fight to attract traffic and generate revenue.

In any discussion about the challenges in Indian aviation the focus is usually on airline operators. But in the aftermath of COVID, airports too are facing a very serious crisis. Revenue has plummeted, but airport operators are faced with fixed costs that represent an even higher share of their total costs than is the case for airlines. Any they have massive capex commitments. The recovery in international traffic continues to be constrained by a combination of muted demand as well as supply-side issues. India has suspended bilateral air service agreements (BASAs) with more than 100 countries, and instead replaced them with air bubble agreements with revised capacity and conditions. To date, such agreements have been signed with only 28 countries. This new framework has impacted international capacity. In light of these conditions, airport operators are facing severe financial stress which is reaching critical levels.

Domestic traffic

After taking into account the impact of the second wave, CAPA Advisory’s proprietary forecasting model projects domestic airport traffic of 160-190 million airline passengers (is equivalent to 80 95 million airline passengers, each of which are counted twice, once at the departure airport and once at the arrival airport) in FY2022, up from 105 million in FY2021, but well below the close to 140 million passengers in FY2020. This projection doesnot take into account a third wave. Although the forecast ranges between 160 million and 190 million, and bearing in mind the considerable uncertainty that exists in the market, the guidance based on currently available information is for traffic towards the bottom end of the range at around 160 million. As was the case in the second half of FY2021, CAPA India expects to see srising confidence and continued traffic recovery in the second half of this
financial year.

International traffic

International traffic is projected to be in the range of 16-21 million passengers, and again, based on current settings it is likely to be constrained towards the lower end of the range because of border restrictions, market access and other strategic risks. The report states that PPP airports are expected to handle around 76 per cent of the international traffic in FY2022.