FCC

Airports May Increase Capex to Rs 600 Bn in 3 Years

2024-12-17

Indian airports are set to increase their capital expenditure to Rs 60,000 crore over the next three fiscal years to accommodate rising passenger numbers. Revenues are expected to grow annually by 17%, supported by increased passenger traffic, higher tariffs, and expanded non-aeronautical income sources. Despite an increase in debt due to expansion plans, airports are expected to maintain strong credit ratings due to a stable regulatory environment.

In a recent report by Crisil, it was revealed that India's airports will ramp up their capital expenditure to Rs 60,000 crore by FY27, up from Rs 53,000 crore in FY22-FY24. This investment will cater to an additional 65 million passengers each year. The analysis was based on 11 private airports which together accounted for 60% of total air traffic in FY24.

Private airports’ revenue is forecast to grow by an average of 17% between FY25 and FY27, driven by increasing passenger numbers, higher tariffs, and additional spending within the airport ecosystem.

Crisil also highlighted the importance of a predictable regulatory framework and better access to funding in maintaining the healthy credit profiles of private airports. According to Manish Gupta, Senior Director at Crisil Ratings, the number of passengers is expected to grow at an 8-9% compounded annual growth rate (CAGR) from 376 million in FY24, with domestic traffic making up over 80% of this volume. This surge will be driven by both business and leisure demand and government initiatives to expand air travel reach.

The government’s UDAN scheme, which had operationalised 84 airports and 579 routes by July 2024, is already providing regional connectivity. Although these routes contribute just 2% to domestic air traffic, they are expected to become a crucial feeder network for larger metro airports.

International traffic is expected to rise due to growing business travel, eased visa processes, and improved airline connections. To meet this demand, airport operators are investing in expanding terminal facilities and runways. Airports are also diversifying into non-aeronautical services like lounges, parking, food, and retail, which will help boost revenue.

Despite the high debt funding for this expansion, the credit profiles of private airports are expected to remain strong due to the projected 17% revenue growth over the next few years. Ankit Hakhu, Director at Crisil Ratings, emphasized that the ongoing investment in non-aeronautical services would play a crucial role in boosting overall revenue.