Despite the impact of the COVID-19 pandemic, long term prospects of the aviation industry remain strong especially due to the current low penetration in India and the government’s continued push to connect smaller towns. Large investments to the tune of Rs 42,000 crore are expected in capacity expansion by private airport operators in the next five years through the financial year 2026, according to forecast credit ratings agency CRISIL.
“Economic growth will boost air traffic volumes given the impact on increase in per capita consumption and shift in preference towards an efficient mode of commute. Given that air traffic in India tends to grow faster than the GDP growth, and the government’s push to connect lower-tier cities with metros under its Regional Connectivity Scheme, we expect a robust 8.5 per cent annual air traffic growth at Indian airports till fiscal 2026,” says Ankit Hakhu, director at CRISIL Ratings.
India’s air traffic grew at 8 per cent per year between 2016-2020, which led to airports operating at 115 per cent of their design capacity (175 million passengers versus a capacity of 150 million). But, COVID19 hit hard last year and the subsequent economic slump led to air traffic crashing by 65 per cent.
Even as the COVID19 pandemic hit hard in April-May this year, as infection rate falls and vaccinations continue to gather pace, the outlook has improved. According to the Directorate General of Civil Aviation (DGCA), around 50.07 lakh domestic passengers travelled by air in July 2021, up 61 per cent over the 31.13 lakh people who flew in June.
CRISIL expects India’s real GDP will grow at a compounded annual growth rate of 7.4 per cent over the next four years (financial year 2022-2025).
An additional 190 million are expected to fly pan-India by FY26 over the pre-pandemic base of 340 million in FY20. This will drive the overall traffic to 530 million passengers by FY26, 70 per cent of which will be handled by private airports, according to CRISIL.
This expected demand growth is driving private airport operators to enhance the design capacity to 340 million passengers per annum from the pre-pandemic level of 150 million. Given the strong increase in demand, despite the expansion, the utilisation rates of the airports are likely to remain at around 100 per cent, CRISIL noted.
Courtesy – www.theweek.in