{"id":30372,"date":"2023-05-29T10:45:15","date_gmt":"2023-05-29T05:15:15","guid":{"rendered":"https:\/\/flattrade.in\/kosh\/?p=30372"},"modified":"2023-05-29T10:54:10","modified_gmt":"2023-05-29T05:24:10","slug":"aviation-sector-poised-for-strong-growth-on-rising-travel-demand-infra-boost-report","status":"publish","type":"post","link":"https:\/\/flattrade.in\/kosh\/aviation-sector-poised-for-strong-growth-on-rising-travel-demand-infra-boost-report\/","title":{"rendered":"Aviation sector set for strong growth on rising demand, infra boost, and tariff tweaks: Report"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"30372\" class=\"elementor elementor-30372\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-68e1d767 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"68e1d767\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-149d05a4\" data-id=\"149d05a4\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-1435bb3f elementor-widget elementor-widget-text-editor\" data-id=\"1435bb3f\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>Air passenger traffic is expected to surpass pre-Covid levels in FY24, reaching 1.12 times the previous figures, helped by rising demand for air travel, extensive infrastructure development, and strong economic growth, according to CareEdge Ratings.<\/p><p>As the Indian airport sector gears up for growth, CareEdge Ratings examines the forecasts for air passenger traffic, future growth of non-aeronautical revenue, favourable regulatory environment of the Indian airport sector, and government initiatives supporting the sector\u2019s expansion.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-29ced587 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"29ced587\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-645ae8b5\" data-id=\"645ae8b5\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-2cd5beb3 elementor-widget elementor-widget-heading\" data-id=\"2cd5beb3\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Rebound in Passenger Traffic<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-69f1c6c4 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"69f1c6c4\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-49f80c26\" data-id=\"49f80c26\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-700802ff elementor-widget elementor-widget-text-editor\" data-id=\"700802ff\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>The air passenger traffic was severely affected by the pandemic resulting in a substantial decline to 115 million passengers in FY21. However, the passenger traffic recovered to 327 million passengers during FY23, marking a V-shape recovery for the sector, supported by accelerated pace of vaccination, gradual decline of COVID-19 cases, and resumption of international traffic.<\/p><p>The domestic traffic witnessed nearly full recovery of pre-pandemic level during FY23 and international traffic recovered to 85% of the pre-pandemic levels. The rating agency expects the momentum to continue in passenger traffic and surpass pre-Covid levels by 1.12 times during FY24 to reach 385 million passengers and 12% YoY growth in FY25.<\/p><p>The rating agency noted that the air passenger traffic growth rate and gross domestic product (GDP) growth rate have a multiplier effect. From FY16 to FY20, the air passenger traffic\u2019s CAGR was 1.80 times of GDP CAGR. For FY23-FY25, CareEdge Ratings anticipates an air traffic growth rate of 2.25 times the GDP growth rate, primarily driven by the low base in FY22.<\/p><p>India\u2019s advantageous demographics, characterised by a substantial working population (67% in the 15-64 age group in 2020), an expanding middle class, and a rising per capita income, are expected to propel the growth of air passenger traffic, according to the rating agency. This is further supported by the fact that tier 2\/3 airports experienced a higher CAGR of 16% in passenger traffic over the past six years, compared to the compounded annual growth rate (CAGR) of 11% witnessed by tier-I airports until 2020. This growth can be primarily attributed to the robust expansion of domestic passenger traffic. Fleet expansions by major airlines and the expansion of airports shall also contribute to passenger traffic growth.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-555b5288 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"555b5288\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-5744ef2f\" data-id=\"5744ef2f\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-6211b5a0 elementor-widget elementor-widget-heading\" data-id=\"6211b5a0\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Favourable Regulatory Environment <\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-6a7712a8 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"6a7712a8\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-27721b0e\" data-id=\"27721b0e\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-785aa88 elementor-widget elementor-widget-text-editor\" data-id=\"785aa88\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>Indian airport sector saw a significant change in 2016 with the adoption of the Hybrid Till method, which introduced the inclusion of 30% of non-aeronautical revenue, in addition to aeronautical revenue, when determining future tariffs. This shift represented a departure from the cost-plus and single-till system followed before 2016, according to CareEdge Ratings.<\/p><p>In India, the tariff determination of 27 major airports is governed by the Airport Economic Regulatory Authority of India (AERA) Act, which provides a predefined method for computing the Aggregate Revenue Requirement (ARR) to arrive at the return on regulatory asset base. Moreover, favourable developments in the tariff-setting process has matured through consultation method with stakeholders. Subsequently, there has been improvement in tariff determination process timelines. For instance, the average delay for tariff determination has improved to 0.5 years in 2022 in contrast to 3 years before 2015 and 2 years between 2015-2020.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-d503b69 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"d503b69\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-7a6f1623\" data-id=\"7a6f1623\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-6a8bd781 elementor-widget elementor-widget-heading\" data-id=\"6a8bd781\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Non-aeronautical Revenue <\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-23e1ef8a elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"23e1ef8a\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-92f8e06\" data-id=\"92f8e06\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-5c77e35c elementor-widget elementor-widget-text-editor\" data-id=\"5c77e35c\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>Among the various revenue streams for airports, the non-aeronautical revenue serves as a significant avenue for improving the topline. While international peers typically generate 2 to 3 times more non-aeronautical spending per passenger compared to Indian airports, the non-aeronautical revenue per passenger in India was $1.4 for AAI-operated airports (in contrast to $5.3 for Mumbai), indicating substantial growth potential in this area, according to the rating agency.<\/p><p>CareEdge Ratings said in the report that the income from Food and Beverages (F&amp;B) and advertisement in Indian airports are comparable to the APAC average during the pre-Covid era. However, the contribution from car parking revenues is relatively lower in India due to the availability of multi-modal transportation options. Moreover, India lags significantly behind in \u201cIncome from retail\u201d category with a rate of 34% compared to the APAC average of 57%. The difference is due to lower duty-free income per international passenger in Indian airports, according to the rating agency.<\/p><p>The rating agency stated that future growth in non-aeronautical revenue will be influenced by higher international traffic, a higher proportion of transfer traffic, the use of technology and analytics to better predict passenger preferences and wider product offerings.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-196a3157 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"196a3157\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-3a2db8af\" data-id=\"3a2db8af\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-58c2cf68 elementor-widget elementor-widget-heading\" data-id=\"58c2cf68\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Privatisation Challenges <\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-29da04e elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"29da04e\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-483a98b5\" data-id=\"483a98b5\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-62c35e69 elementor-widget elementor-widget-text-editor\" data-id=\"62c35e69\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>Airports Authority of India, which is a statutory body responsible for creating, upgrading, maintaining, and managing civil aviation infrastructure in India, has identified 25 airports to be privatized between 2022-25 through the National Monetization Policy. The government is planning to bundle one small airport with one big airport for privatisation. However, the sector missed its FY22 and FY23 privatization targets and hence, CareEdge Ratings believes that these it is likely to be further delayed.<\/p><p>Moreover, when non-major airports are privatised, they demand large tariff hikes due to the disparity between tariffs of non-major and major airports and subsequent delays are observed in the issuance of the first tariff order for such airports. In view of the large tariff hike post-privatization, AERA (Airport Economic<br \/>Regulatory Authority of India) also took decisions to defer a certain portion of the tariff hike to the next control period. According to CareEdge Ratings, this can lead to a lower project life coverage ratio for these airports.<\/p><p>The rating agency further stated that timely release of the first tariff order without deferment of approved revenue requirement to the next control period is essential to ensure financial viability and sustain investor interest in airport projects.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-6a6163dc elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"6a6163dc\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-6cab8b1b\" data-id=\"6cab8b1b\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-6df28d80 elementor-widget elementor-widget-heading\" data-id=\"6df28d80\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Funding Capex <br><\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-227324b elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"227324b\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-2cde7894\" data-id=\"2cde7894\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-27894b80 elementor-widget elementor-widget-text-editor\" data-id=\"27894b80\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>The estimated total capital expenditure for the sector in FY24-FY25 is approximately Rs 75,000 crore, primarily aimed at expanding passenger capacities and monetising non-aeronautical revenues. This indicates a funding requirement of around Rs 52,000 crore. Funding challenges for the capex are relatively moderate due to the anticipated true-up of the same in future aeronautical revenues and the longer residual concession period ranging from 30 to 50 years.\u00a0<\/p><p>CareEdge Ratings said the credit profiles of airport entities have improved in FY23 and are expected to remain stable in the medium term, driven by the improved sector outlook following the pandemic.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-7551d6b elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7551d6b\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-30df0ce6\" data-id=\"30df0ce6\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-18999941 elementor-align-center elementor-widget elementor-widget-button\" data-id=\"18999941\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t\t\t<a class=\"elementor-button elementor-button-link elementor-size-sm\" href=\"https:\/\/ekyc.flattrade.in\/openaccount\/?utm_source=Blog&#038;utm_medium=organic&#038;utm_campaign=Demat+Account\">\n\t\t\t\t\t\t<span class=\"elementor-button-content-wrapper\">\n\t\t\t\t\t\t\t\t\t<span class=\"elementor-button-text\">Open a Free Demat Account<\/span>\n\t\t\t\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"Air passenger traffic is expected to surpass pre-Covid levels in FY24, reaching 1.12 times the previous figures, helped&hellip;","protected":false},"author":5,"featured_media":30427,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"csco_display_header_overlay":false,"csco_singular_sidebar":"","csco_page_header_type":"","csco_page_load_nextpost":"","csco_post_video_location":[],"csco_post_video_location_hash":"","csco_post_video_url":"","csco_post_video_bg_start_time":0,"csco_post_video_bg_end_time":0,"csco_post_video_bg_volume":false,"footnotes":""},"categories":[17,65],"tags":[46,43,95,78,139,48,26,692,144,806,693,393,77,47,24,23,84,21],"class_list":{"0":"post-30372","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"category-industry","9":"tag-market-news","10":"tag-market-update","11":"tag-markets","12":"tag-nifty","13":"tag-nifty-futures","14":"tag-nifty-today","15":"tag-nse","16":"tag-opening-bell","17":"tag-options","18":"tag-passenger","19":"tag-pre-market","20":"tag-revenue","21":"tag-sensex","22":"tag-sensex-today","23":"tag-share-market","24":"tag-stock-market","25":"tag-stocks","26":"tag-trading-account","27":"cs-entry","28":"cs-video-wrap"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - 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