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March 01, 2019

Sector Report: Airport Infrastructure

This report is available to users in India for ₹40,000 + applicable taxes

 

Table of Contents

 

  • Summary
  • Passenger
  • Freight
  • Investment plans
  • Introduction
  • Brownfield airports
  • Greenfield airports

 

Summary

 

Infrastructure constraints limit passenger growth; only 31 airports operational under UDAN

 

For fiscal 2020, CRISIL Research expects airport passenger traffic to grow by 14-16%, compared with 15-17% growth in fiscal 2019, on account of slower domestic traffic growth. Domestic passenger traffic, which accounts for ~80% of total airport passenger traffic, is expected to slow down on account of a strengthening in air fares.

 

Over fiscals 2018 and 2023, we expect overall passenger traffic to clock 13-15% compound annual growth rate (CAGR), as domestic traffic share rises further to 81-82%. The rise in share is on account of faster anticipated growth in domestic passenger traffic at 13-15%, while international passenger traffic is expected to grow 8-10% during this period.  

 

In November 2018, the number of operational UDAN airports remained at 31 even as the number of operational routes fell to 75, from 90 in August 2018. The reduction was mainly on account of a cancellation of routes awarded to Air Odisha and Deccan Charters during UDAN Phase I.

 

However, the number of airports having connectivity is expected to improve going forward as more routes from UDAN Phase II become operational. Moreover, the government recently announced theawarding of 235 routes under UDAN Phase III, in partnership with the Ministry of Tourism. This is expected to support growth at UDAN airports.

 

Freight traffic growth at Indian airports to flatten in fiscal 2020

 

For fiscal 2020, total freight traffic growth at Indian airports is expected to remain flat at 6-8% on account of a slowdown in domestic freight traffic, while faster international freight traffic growth is expected to restrict a slowdown in total freight traffic. The slow growth is on account of a revision in e-commerce policy by the Department of Industrial Policy and Promotion (DIPP) that is expected to reduce the deep discounts offered by e-commerce players through their own sellers, thus impacting ecommerceconsignments.

 

For fiscal 2019, freight traffic growth is estimated at 6-8%, driven by an 8-10% growth in domestic freight traffic, even as traffic growth is expected to taper during the fourth quarter of fiscal 2019 on account of DIPP regulations on e-commerce. On the other hand, exceptional traffic on account of GST implementation and movement of aircraft components observed during fiscal 2018 resulted in a higher base, reducing international freight traffic growth to 3-5% in fiscal 2019.

 

During the first nine months of fiscal 2019, freight traffic growth stood at 7% on-year, led by 12% growth in domestic freight while international freight remained subdued at 4%.

 

Delayed investments to keep airports under pressure till fiscal 2023

 

CRISIL Research expects investments to the tune of Rs 450-480 billion in airport infrastructure between fiscals 2019 and 2023, compared with estimated investments of Rs 200-225 billion over the past five years. Despite the steep rise in investments, airports will continue to be under significant pressure on account of huge delays in investments.