The passenger traffic at the Delhi’s Indira Gandhi International (IGI) Airport has dropped 12.7% year-on-year in May 2019, according to the data from the Aviation Authority of India (AAI). Such a decline in traffic is a sharp turnaround from the average annual increase of 15% between 2016 and 2018.
The drop in the passenger traffic will hurt the credit metrics of the airport midst its expansion plans, says the US-based financial services firm Moody’s Investors Service.
The decline in traffic is credit negative for DIAL (Delhi International Airport Limited) because most of its revenue – outside of income from land monetization and rental – is linked to passenger and aircraft movements at the airport, Moody’s Investors Service said in its report on DIAL.
Our base case scenario assumes that the downward pressure on DIAL’s passenger traffic will gradually dissipate in the remaining months of fiscal 2020 and for passenger traffic to grow at a high-single-digit percentage annually over the next 2-3 years, the report said.
The decline in traffic at IGI Airport is a result of the grounding of Jet Airways in April 2019. Jet Airways accounted for 18% of the domestic passenger traffic in the country, besides occupying 14% of the international traffic. Another factor the grounding of Boeing 737-Max aircraft may have also weakened the traffic at Delhi airport.
DIAL’s credit metrics are already likely to stay at the lower end of the range considered appropriate for its Ba2 ratings due to the additional debt incurred to fund its major expansion plan and Moody’s base case assumption that tariffs will remain at around the current low level.
Meanwhile, in another development, IGI airport will become India’s first plastic-free airport in the next five months. The project that covers all three terminals and the airside area of the airport intends to replace the plastic-based materials with paper and bio-based compostable materials. DIAL plans to ensure bio-friendly packing of food takeaways and beverages and using environmental-friendly bags for retail shopping. The initiative will be later expanded to other airports as well.