Thursday, March 18, 2021

Indian airports staring at a net loss of around Rs 5,400 cr in FY21; expected to improve net profit in FY22: ICRA

Hyderabad: The Indian Airports sector is expected to witness improvement in operating income by 73 per cent to Rs 14,500 crore in FY2022 and net profit to Rs 190 crore supported by recovery in passenger traffic by around 130 per cent Y-o-Y, said ICRA in its report on Wednesday.

Given the significant delays in tariff orders in the past, timely tariff orders from the regulator, which adequately compensates for the ongoing capex and revenue loss due to Covid remains critical from the credit perspective.

The domestic passenger traffic is expected to decline by 61 per cent Y-o-Y and international traffic by 85 per cent Y-o-Y in FY2021. With the sharp correction in passenger traffic estimated at around 66 per cent Y-o-Y in FY2021, the sector is likely to witness significant net loss of Rs. 5,400 crore and cash loss of Rs. 3,500 crore in FY2021, the report said.

The robust liquidity of the players has however, aided the sector in sailing through the unprecedented times.

For the next year, FY2022, the industry net profit is expected to improve to Rs. 190 crore, backed by passenger traffic recovery by 130 per cent Y-o-Y.

The ratings of airport operators continue to derive strength from the regulatory framework, which allows efficient cost-recovery from user tariff; the variation in passenger traffic due to economic cycles that often lead to temporary traffic decline are offset by truing-up the shortfall in the next regulatory period, albeit with a lag.

Therefore, the loss of revenues on account of Covid-19 is expected to get largely recouped over the next control period for the airports developed on PPP basis, it revealed and said that the ratings in the sector have remained more resilient.

Giving more insights, Mr. Shubham Jain, Senior Vice President and Group Head, ICRA said, “With the subdued international traffic, which has higher yield per passenger when compared to domestic traffic, the revenues and profitability are adversely impacted in FY2021. The sector is expected to witness a decline in operating income by 61 per cent to Rs. 8,400 crore, while reporting an operating loss of around Rs. 1,700 crore (-20% margin) and net loss of Rs. 5,400 crore (-64% margin) in FY2021.

The overall cash loss for the sector is estimated at around Rs. 3,500 crore in FY2021. With such significant losses, the debt coverage metrics have deteriorated sharply. However, the liquidity of airport operators is robust with opening cash balances of Rs. 8,100 crore as on March 31, 2020 which has supported in meeting the operational expenses, debt obligations and equity requirements for capex, said Jain.

18/03/21 UNI

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