Drop in Passenger Traffic might lead to net loss of Rs 5400 cr. for Indian Airports in FY21

The hospitality sector has witnessed a major blow post the Coronavirus lockdown. And amid all of this, the losses continue to grow. With the financial year coming to an end, everyone has been bent on making up for past losses and calculations. Among other sectors that have been affected, travel and hospitality is one that was majorly affected due to the lockdown. Given that everything was shut and even now, there are many restrictions, the latest reports are about the losses likely to be incurred by Indian Airport in FY21.

As per reports in the Business Standard, the reduction in passenger traffic means a sever loss for the airport sector in India. The traffic is estimated at 66% year-on-year in FY21, which may lead to a net loss of Rs 5400 crore and cash loss of Rs 3500 crore during the year, as told by ICRA. None the less, it is the liquidity of the players that will help the sector to get through given the tough times, suggest a report from the rating agency.

ICRA Suggests Recovery by the Next Financial Year

As per ICRA, the industry might be able to have a net profit of Rs 190 crore which will be possible with a recovery in passenger traffic at a rate of 130% year-on-year. The sector is looking at an improvement and it is likely to go up to 73% which means a huge amount of Rs 14,500 crore amounting to a net profit of Rs 190 crore.

Decline in Passenger Traffic Ahead

Among other things, the report also stated that the passenger traffic within the country is likely to see a decline by 61% year-on-year while the international traffic by 85% Y-o-Y in FY2021. Senior VP & Group Head, ICRA, Shubham Jain said that the reduced traffic from overseas, which has a higher profit than domestic traffic, the revenues as well as profits have been majorly affect in FY2021. He further mentioned that the sector will therefore see a decline in the operating income by 61% to Rs 8,400 crore, and a loss of around Rs 1,700 crore, with a net loss of Rs 5,400 crore in FY2021. The overall cash loss, as mentioned, has been estimated at a whopping Rs 3,500 crore.

Deterioration in Debt Coverage Metrics

As a result of the losses that have been incurred under the sector, there is also a decline in the debt coverage metrics. None the less, the onus now lies in the liquidity of airport operators due to the robustness given the opening cash balances of Rs 8,100 crore as on March 31, 2020. It is that aspect that has supported in keeping up with the expenses for operation, equity requirements for capex, and debt obligations.

While things look bright in the near future, a lot depends on how thing progress from here on given the Coronavirus cases, among other things, being a primary concern. With passenger traffic a major concern even now, the upcoming financial year will be crucial in determining the net losses and profits at the end of a later stage.

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