RISING AIR TRAFFIC TO LIFT PVT AIRPORTS’ REVENUE

Non-aeronautical sources include advertising, retail, lounge and duty-free shops. About two-thirds of the increase in the revenue of airports is expected to come from aeronautical sources (45 per cent growth on-year). This is because almost half the airports in the CRISIL Ratings study will clock a pre-determined increase in their aeronautical tariffs by 25 per cent on average.

Aeronautical tariffs are regulated and allow for cash flow required by airports to service the debt availed for aeronautical capex and a return on equity for the operator. Airports had undertaken significant expansion during the pandemic to more than double their capacity in anticipation of the current spurt in passenger volume.

The current rise in aeronautical tariffs is compensating for these capacity expansions.

The remaining one-third of the revenue growth will be driven by non-aeronautical sources (15 per cent growth on-year). These have been increasing steadily, driven by rising passenger spends on retail and food and beverage, as well as real estate leasing and advertising. “The recovery in the revenue growth trajectory — after three years of decline led by the pandemic— comes at the right time to support the increasing debt obligations of private airport operators arising from the significant expansion during the pandemic period. With the projected increase in revenue, the debt cover of operators is expected to recover to 1.4 times, a level last seen before the pandemic between fiscals 2018 and 2020.