9 airports operating under PPP model to log 50 per cent growth in revenue this fiscal

According to a report released on Wednesday, nine airports in the nation that operate under the PPP model are anticipated to see a 50% increase in total revenue, to Rs 9,650 crore, from Rs 6,450 crore, this fiscal year. According to the credit rating company Care Edge Ratings, the expected increase in revenue will be driven by a predicted 70% year-over-year increase in passenger traffic, which is expected to reach 93% of pre-pandemic levels in the current financial year.

However, altogether, it was predicted that in the fiscal year beginning in April 2023, passenger traffic will increase by 1.12 times compared to the pre-Covid level.

The rating organisation also anticipates a further delay in the privatisation of airports and the government's intention to sell its part in joint venture airports.

"Nine PPP airports, which account for 50% of all passenger traffic in India, had their overall financial positions evaluated by Care Edge Ratings. According to estimates, these airports' total revenues will increase by 50% from FY22 to FY23, from Rs 6,450 billion to Rs 9,650 billion, driven mostly by high passenger growth of 70% on an annual basis "The agency reported.

It continued by saying that while strong passenger traffic is advantageous for the industry, timely issue of tariff orders with an anticipated tariff rate increase for some airports is essential.

According to Care Edge, the Airport Authority of India provided assistance to airport operators during the Covid period by exempting claims on revenue share, which allowed PBILDT margins (profit before interest, leasing, depreciation, and taxes) in FY22 to stay at a healthy 56%.

It said that from the following year, such margins are projected to stabilise at around 45%, principally supported by the increasing scale of operations, but that with the return of revenue sharing with the AAI, PBILDT margins are likely to decline to 37% during FY23.

Twenty-five airports have been chosen for monetization via the National Monetization Pipeline (NMP). According to Care Edge, the projected fund inflows from the monetisation of 14 airports and the sale of AAI's share in existing airports are budgeted at Rs13,000 crore through FY23.

Care Edge Ratings feels that these timescales are likely to be further delayed due to the announcement of such aggressive timelines without any corresponding steps for monetisation, necessitating action from the Central Government.

A rising working population and India's GDP development, which have a multiplier effect on the rise of air passenger traffic, are positive demographic trends for Indian airport operators, according to the report.

The early issuance of tariff orders will improve the regulatory environment, opening the door for these operators to see their revenue sooner, the paper claims.

Additionally, indices of leverage are probably going to stay high for FY23. However, it stated that from FY24, leverage indicators are projected to improve due to an increase in air passenger volume above pre-Covid levels and the issuing of new tariff orders in some PPP airports.

Because of the low base in FY22, Care Edge Ratings anticipates that the air traffic growth rate between FY23 and FY25 will be 2.25 times greater than the GDP growth rate. According to Maulesh Desai, Director at Care Edge Ratings, "India's favourable demographic profile with a rising working population and widening middle class hold good for long-term prospects. Key growth drivers include improved economic output, declining fare gaps between rail and air, and full resumption of international travel in the short term.

Getting tariff orders for the upcoming control period in a timely manner, according to him, provides great revenue visibility and helps make up for lost air revenue.

Desai did point out that delays in the issuance of the first tariff orders in some of the concessions were mostly caused by discrepancies in the estimated Capex and proposed User Development Fees (UDF) between developers and the authority.

Source: ECONOMIC TIMES