9 airports using the PPP model will see a 50% increase in revenue this fiscal year

9 airports in the nation that use the PPP model are anticipated to increase their overall revenue by 50% this fiscal year to Rs 9,650 crore from Rs 6,450 crore.

A Public-Private Partnership (PPP) brings together the public and private sectors to manage and operate airports that were previously provided by the public sector.

At the beginning of December, the Airports Authority of India (AAI) leased out 8 airports namely, Delhi, Mumbai, Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru for Operations, Management and Development under Public-Private Partnership (PPP). Out of these, seven airports viz. Mumbai, Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru are managed by M/s Adani Enterprises Limited (AEL).

The Public Private Partnership (PPP) airports at Delhi, Hyderabad and Bengaluru are undertaking major expansion projects of around Rs 30,000 crore by 2025

According to the Credit Rating Agency CareEdge Ratings, the expected increase in revenue will be driven by a predicted 70% year-over-year increase in passenger traffic, which is expected to reach 93% of pre-pandemic levels in the current financial year. However, it stated that overall, passenger traffic is anticipated to increase by 1.12 times in the fiscal year beginning in April 2023 compared to the pre-Covid level.

The rating agency also predicts that the government’s plan to sell its part in joint venture airports and the privatisation of airports would be further delayed.

“CareEdge Ratings has assessed the aggregate financial position of 9 PPP airports which represent 50 per cent of total India’s passenger traffic. The aggregate revenues of these airports are estimated to grow by 50 per cent from Rs 6,450 crore during FY22 to Rs 9,650 crore during FY23, mainly led by strong passenger growth of 70 per cent on a year-on-year basis.”

–CareEdge, Credit Rating Agency

It continued by saying that while strong passenger traffic is advantageous for the industry, the timely issue of tariff orders with an anticipated tariff rate increase for some airports is essential.

While high passenger volumes are beneficial for the industry, prompt issuance of tariff orders with projected tariff rate increases for particular airports is crucial.

According to CareEdge, the AAI provided assistance to airport operators during the Covid period by exempting claims on revenue share, which allowed PBILDT (Profit Before Interest, Leasing, Depreciation, and Taxes) margins in FY22 to stay at a healthy 56%.

It said that from the following year, such margins are projected to stabilise at around 45%, principally supported by the increasing scale of operations, but that with the return of revenue sharing with the AAI, PBILDT margins are likely to decline to 37% during FY23.

25 airports have been chosen for monetization via the National Monetization Pipeline (NMP).

As per NMP, 25 AAI airports namely Bhubaneshwar, Varanasi, Amritsar, Trichy, Indore, Raipur, Calicut, Coimbatore, Nagpur, Patna, Madurai, Surat, Ranchi, Jodhpur, Chennai, Vijayawada, Vadodara, Bhopal, Tirupati, Hubli, Imphal, Agartala, Udaipur, Dehradun and Rajahmundry have been earmarked for leasing over the years 2022 to 2025.

Bhubneshwar Airport is among the 25 airports that have been chosen for monetization via the NMP

According to CareEdge, the projected fund inflows from the monetisation of 14 airports and the sale of AAI’s share in existing airports are budgeted at Rs13,000 crore through FY23.

CareEdge Ratings feels that these timescales are likely to be further delayed due to the announcement of such aggressive timelines without any corresponding steps for monetisation, necessitating action from the Central Government.

Additionally, it was stated that the expansion of India’s GDP and its impact on the rise of air passenger traffic, together with favourable demographics like an increasing working population, bode well for Indian airport operators.

Positive demographic trends, such as an expanding working population, along with the growth of India’s GDP and its effect on the increase in air passenger traffic, augur well for Indian airport operators.

The paper claims that by streamlining the regulatory environment and issuing tariff orders on time, these operators will be able to see their money sooner. Additionally, for FY23, leverage indicators are probably going to stay high. However, it noted that from FY24, leverage indicators could improve as air passenger traffic increases above pre-Covid levels and new tariff orders are issued in some PPP airports.

Also read: Centre to privatise 25 airports in next 3 years

CareEdge Ratings anticipates that the air traffic growth rate between FY23 and FY25 will be 2.25 times greater than the GDP growth rate! 

Source: Business Standard