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Coronavirus impact: Air passenger traffic to decline by 45-50% during FY21, says ICRA

India's aviation industry faces uncertainty in the air traffic recovery timeline in the wake of subdued demand for leisure (especially international) by risk averse passengers and likely decline in disposable income in the hands of consumers

twitter-logoBusinessToday.In | June 3, 2020 | Updated 20:30 IST
Coronavirus impact: Air passenger traffic to decline by 45-50% during FY21, says ICRA
In the financial year 2018-19, domestic airports handled around 345 million passengers

Indian aviation sector is expected to remain under stress during the first half of financial year 2020-21, while recovery is likely only during the second half of the fiscal, reveals a recent report. Passenger traffic at Indian airports across the country is estimated to fall by 45-50 per cent during FY21 in wake of the coronavirus outbreak, according to a report released by credit rating agency ICRA on Wednesday.

"There prevails considerable uncertainty in the air traffic recovery timeline in the wake of subdued demand for air travel for leisure (especially international) by risk averse passengers and likely decline in disposable income in the hands of consumers," said Anupama Arora, Sector Head & Vice President - Corporate Ratings, ICRA.

"Moreover, factors like dip in business travel due to the subdued global macroeconomic environment, increasing use of virtual communication modes by the business community and possible continuation of travel restrictions, in some form, by various countries have also significantly influenced the overall scenario," Arora added.

India's aviation industry is staring at huge revenue loss in the current fiscal due to the unprecedented disruption on the back of COVID-19 pandemic and new regulatory norms issued by Directorate General of Civil Aviation (DGCA) to contain the spread of virus. The government has also capped the domestic fares after allowing gradual resumption of domestic flights. The domestic and international flights remained grounded for the last two months from March 25 to May 25.

Also Read: Coronavirus lockdown: Aviation industry stares at Rs 25,000 crore revenue loss, says CRISIL

In the financial year 2018-19, domestic airports handled around 345 million passengers on the back of strong growth especially in domestic traffic.

"However, passenger traffic growth had declined considerably in the initial months of FY2020, primarily attributable to grounding of major airline - Jet Airways and subdued macro-economic environment. Subsequent onset of tourist/festive season and discounted fares offered by airlines had led to some recovery," the ICRA report noted.

"However, there was a sharp contraction in Q4 FY 2020, because of the aforementioned pandemic, which resulted in an overall traffic growth decline of 1 per cent in FY 2020," it added.

Also Read: Another big blow to airlines! Jet fuel prices hiked by almost 50%

According to a CRISIL report, domestic aviation industry will crash-land this fiscal (FY21) with revenue loss of Rs 24,000-25,000 crore due to the extension of lockdown. Airlines will be the worst-affected, contributing more than 70 per cent of the losses, or nearly Rs 17,000 crore, followed by airport operators with Rs 5,000-5,500 crore, and airport retailers (including retail, food and beverages and duty-free) with Rs 1,700-1,800 crore. The agency warned that the losses will climb if travel restrictions last longer in hubs such as Mumbai, Delhi, Chennai and Kolkata. The aviation sector will take at least 6-8 quarters to reach pre-pandemic levels, it added.

By Chitranjan Kumar

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