In the prevailing disequilibrium in Global economic factors, the Indian Aviation Sector, especially Airports, also went slithering down in terms of growth after a dream run in the last few years. Below are the key highlights indicating the same:
- Passenger traffic de‐grows by 1.9% in FY13, domestic drag: Indian airports witnessed passenger (PAX) de-growth of 1.9% in FY13 (13.2% growth in FY12), with 159m travellers using them for their travel. Excess capacity further resulted in dwindling load factors. There was a 200bps y-o-y fall in the share of domestic PAX at 73% which was evident due to a y-o-y de-growth in this category at -4.3%. International PAX y-o-y growth (though a gain of 200bps y-o-y in total share) remained subdued at 5.4% in FY13 as compared to 7.6% in FY12. With this tally, the 5-year CAGR of total PAX stands at 6.4%. With an increase in ATF prices, depreciating rupee, levy of airport and service charges, general slowdown in economic cycle and increasing crude prices, the corporate and leisure travel plans will surely be curtailed. However, CAPA and other Industry players believe that Indian PAX traffic should grow by 5-8% during FY14E. In Q1FY14, PAX growth was at 3.5% y-o-y. To counter this, Indian airlines has resorted to massive discounts and fare war amongst them to gain the market share.
As per Airports Council International (ACI), two major Indian Airports, Mumbai and Delhi rank 48 (down by 4 places) and 37 (down by 3 places), respectively, based on the number of passengers handled in 2012. Hyderabad has moved to 2nd position from 3rd last year.
- Air Traffic Movement (ATM) also halts: As a result of the turmoil faced by airlines in India and abroad and exit of Kingfisher Airlines, ATMs y-o-y registered 4.2% de-growth at 1.4m ATMs. Again, Domestic ATMs took a hit and de-grew by 5.7% y-o-y; although, it was cushioned by a meek performance of International growth of 1.5% y-o-y. General Aviation carriers (excl. regular carriers) registered growth of 2.7% y-o-y. International ATM growth rates were higher in new geographies like Vizag, Bagdogra & Varanasi (Tier 3 airports) and Cochin, Hyderabad and Ahmadabad (metro airports). The higher growth in traffic at the above airports is due to an increase in frequency by existing airlines and start of operations by new airlines. In Domestic ATMs, geographies like Calicut, Rajkot, Tirupati (Tier 3 airports) and Srinagar, Mangalore, Chandigarh (Tier 2 airports) have gained major grounds. In Q1FY14, ATM de-growth has been 0.5% y-o-y.
- Cargo/Freight reports de‐growth: Indian Airports reported a 3.9% y-o-y degrowth in freight at 2.2m tonnes. De-growth was higher in International segment at 4.2% as against 3.4% in the Domestic sector. Total freight handled worldwide during this period has also witnessed a decrease of 0.1%. In Q1FY14, the cargo de-growth story continues with 3.6% y-o-y decline.
- How has privatization fared: Airports developed under PPP model currently handle 60-70% of passenger traffic in the country. While the
CAGR of PAX growth in the last five years has been 6.4% for Indian airports, airports with PPP model showed 11% growth during the same
period. Percentage of passengers handled by PPP Airports (which are mainly located in the metros) in comparison to all other airports has been
56.4% in FY13 which is down by 70bps y-o-y; this is mainly attributed to opening up of new regional airports. Similarly in ATMs, CAGR of PPP airports has been 5% over the last five years which is double the total ATMs.
- Conclusion: The Indian airports dream run and golden era has been hindered as Airlines are bleeding, FDI is caught in regulatory glitches, Rupee is depreciating and economy overall is in a mess. Amongst the 125 airports (out of 136 airports) maintained by AAI in the country, only 10 are profit-making. After registering a collective loss of approx. US$1.6bn (airlines) and approx. US$0.1bn (airports) in FY13, Indian aviation players are likely to lose in FY14E too. However, development of regional airports is still on the priority list which is expected to aid the traffic growth.
PPP STANDS FOR PUBLIC PRIVATE PARTNERSHIP.
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