Omicron to push air traffic recovery into fiscal 2024: CRISIL

A material impact on the credit quality of airport operators, however, is unlikely as the dip in revenue is expected to be limited by a likely strong rebound and operators have adequate debt servicing cushions, liquidity buffers and financial flexibility to absorb the blip in traffic.

“The high infection rate of Omicron has resulted in several state governments and local authorities, such as Delhi and Mumbai, announcing restrictions on movement. In fact, domestic traffic is down by 25 per cent from the highs of December 2021 in the first week of January 2022 itself," CRISIL Ratings Senior Director Manish Gupta said.

"Both personal and business travel will take a hit in January and February, leading to air traffic plunging an estimated 30 per cent sequentially in the fourth quarter of this fiscal," Gupta said.

This spill-over impact is likely to delay recovery of air traffic from earlier expectation of it happening in fiscal 2023. However, recovery is expected to be achieved within early part of fiscal 2024.

This is because air traffic is likely to rebound faster this time around, compared with the second wave, when it took from May to November 2021 to recover from 16 per cent to 85 per cent of the fiscal 2020 traffic.

The rebound confidence is underpinned by higher proportion of vaccinated populace ― over 71 per cent now vis-a-vis only 53 per cent as of end May 2021 ― as well as learnings of governments and authorities from the past waves in implementing Covid-19 protocols for safe travel.

The caseload, too, is expected to peak in February and return to the December 2021 level by the end of March 2022. As a result revenues for fiscal 2023 and 2024 are likely to remain stable.

What will further aid revenues is the expected uptick in tariffs. As per the recently released tariff orders for the Bengaluru and Hyderabad airports, the tariffs will more than double from April 2022.

Consequently, debt servicing cushions should remain adequate at over 1.2 times for these airports in fiscals 2023 and 2024, the agency said.

“The credit quality of the airport sector is likely to sustain the Omicron impact. In addition to the adequate debt servicing cushions, the credit quality is supported by a healthy liquidity cover of around six months of debt obligation over fiscal 2023 and strong financial flexibility,” CRISIL Ratings Director Ankit Hakhu said.