Extracts from the CAPA India Airport Outlook FY2022

July 27, 2021by capa-india

In any discussion about the challenges in Indian aviation, the focus is usually on airline operators. But in the aftermath of COVID, airports too are facing a very serious crisis. Click here to know more or order your copy of the CAPA India Airport Outlook FY2022.

  • Revenue has plummeted, but airport operators are faced with fixed costs that represent an even higher share of their total costs than is the case for airlines. And they have massive capex commitments.
  • The decimation of international traffic has been particularly painful for airports. Aero and non-aero revenue are both critically dependent upon international operations. In FY2021, India’s airport operators lost USD942 million, while other on-airport concessionaires (e.g. for ground handling, duty free, retail, food and beverage, car parking etc.) lost a further USD1+ billion. Airport-based businesses, therefore, lost USD2.0-2.5 billion in total.
  • The recovery in international traffic continues to be constrained by a combination of muted demand as well as supply side issues. India has suspended bilateral air service agreements (BASAs) with more than 100 countries, and instead replaced them with air bubble agreements with revised capacity and conditions. To date, such agreements have been signed with only 28 countries. This new framework has impacted international capacity.
  • In light of these conditions, airport operators are facing severe financial stress which is reaching critical levels. Indian airport operators are highly leveraged with limited scope to increase debt. Given the need to raise capital as a result of COVID (especially to finance non-aero losses and capex), financing will therefore need to come in the form of equity. If incumbent promoters are unable to infuse the necessary funding this may lead to changes in ownership and precipitate a second wave of consolidation in the airport sector.
  • With the prospect of over-capacity for several years to come, the Indian airports will need to shift to airline-driven and passenger-centric business models in which they will have to fight to attract traffic and generate revenue.

Review of Indian Airports in FY2021
  • The unprecedented slump in traffic as a result of COVID has set the clock back by 13 years. Total traffic at Indian airports fell by 66.3% in FY2021 to 115 million passengers, a level last seen in FY2008. This comprised 105 million domestic airport passengers (equivalent to 52.5 million airline passengers, each of which are counted twice, once at the departure airport and once at the arrival airport), and just over 10 million international passengers.
  • Domestic traffic declined by 61.8% to 105 million passengers, while international traffic was decimated, declining by 84.8% to just 10.1 million passengers, the lowest level in almost 30 years.
  • CAPA Advisory estimates that total traffic could have been 7-10 million passengers higher, were it not for frequent changes to travel restrictions, which caused confusion and deterred travel. This was particularly the case in Maharashtra where it is estimated Mumbai Airport alone may have lost 3.5-4.5 million passengers as a result. Among the metro airports, Mumbai experienced the steepest decline in total traffic.

     Year-on-year change in passenger traffic FY2021 vs. FY2020

Delhi Mumbai Bangalore Hyderabad Chennai Kolkata India
Domestic -60.8% -70.7% -62.4% -58.5% -70.2% -60.2% -61.8%
International -82.0% -90.1% -89.8% -85.3% -89.8% -95.1% -84.8%
Total -66.4% -75.9% -66.3% -63.4% -75.3% -64.9%


  • Due to restrictions related to the pandemic in Maharashtra, Bangalore overtook Mumbai for the very first time to emerge as the second busiest domestic airport in India in FY21, behind Delhi. In the international segment, Delhi retained its position as the busiest airport, and in fact increased its share by almost 5ppts to 31.7%, in part due to being a focus airport for Air India’s Vande Bharat Mission flights.
  • The decline in total cargo volumes was more moderate than was the case for passenger traffic, falling by 25.6% year-on-year. The performance of domestic (-27.9%) and international (-24.0%) was relatively similar.
  • With a strong recovery during the second half, by the end of the year most of the metro airports were reporting monthly domestic cargo traffic that was very close to, or even above pre-COVID levels. Chennai reported positive year-on-year growth in each of the last four months of FY2021.
  • In terms of international cargo, Bangalore was the strongest performing metro airport seeing a fall of just -7.4%, compared with -36.6% in the case of Kolkata.

Year-on-year change in cargo volumes FY2021 vs. FY2020

Delhi Mumbai Bangalore Hyderabad Chennai Kolkata India
Domestic -22.7% -46.1% -20.6% -23.9% -16.4% -28.7% -27.9%
International -22.9% -24.1% -7.4% -22.4% -18.9% -36.6% -24.0%
Total -22.9% -31.3% -12.7% -23.0% -18.3% -31.6%


Source: CAPA India research and analysis; Airports Authority of India

  • Mumbai experienced a 5ppts decline in its share of domestic cargo volumes, equivalent to a loss of around 50,000 tonnes. The relative shares of international cargo were reasonably stable, with Bangalore seeing the highest increase at 2.4ppts. Bangalore reported positive year-on-year international growth for most of the second half of the year.
  • Indian airport operators are estimated to have posted a consolidated loss before tax of INR70.0 billion (USD942 million) in FY2021, compared with a profit of INR51.6 billion (USD694 million) in FY2020. The AAI accounted for 69% of these losses and PPP operators 31%. Total cash burn for the year reach INR135.9 billion (USD1.83 billion).
  • Airport operators, and airport-based concessionaires (e.g. retail, duty free, food & beverage, car parking, ground handlers, MROs etc.) combined are estimated to have loss INR149-186 billion (approximately USD2.0-2.5 billion) in FY2021.
  • The combined operating revenue of Indian airports declined by an estimated 64.1% to INR83.1 billion (USD1.1 billion) in FY2021. However, due to the fact that most airport expenses are fixed, Indian airports saw their operating costs decline by only 13.8% (increasing to 28.5% if the impact on revenue share is included).
  • EBITDA for the airport sector declined from positive earnings of INR94.2 billion (USD1.3 billion) in FY2020, to negative earnings of –INR15 billion (-USD0.2 billion) in FY2021. However, EBITDA remained positive for PPP airports, but was dragged down at an industry level by the AAI.
  • Non-aero revenue at PPP airports fell by around 60% in FY21 to INR36.0 billion (USD485 million), due to a combination of the slump in traffic, and a decline in retail and F&B revenue per passenger. There was a steeper drop of 70.5% at AAI airports, compared with 58.2% at PPP airports.
  • Most PPP airports actually saw an increase in total non-aero revenue per passenger, driven by an increase in duty free sales per international passenger. This was largely a mathematical aberration arising from the fact that passengers that traditionally do not spend on duty free (e.g. labour and other low yield segments) and dilute overall SPP, were not travelling. Furthermore, those that were purchasing duty free were buying larger volumes of products such as alcohol on arrival due to uncertainly about availability during lockdowns.
  • Although cargo volumes at PPP airports declined by 24.8% year-on-year in FY2021, the revenue they generated from cargo handling activities increased marginally to INR6.8 billion (USD92 million) due to a significant increase in yields. earnings for airports, especially in the international segment due to demurrage and other optional services.
  • Third party ground handlers were significantly impacted by COVID in FY2021. They rely on foreign carriers as most Indian carriers prefer to self-handle. AIATSL and AISATS are the only two ground handlers with a sizeable portion of their revenues attributable to Indian carriers. In FY2021, foreign carriers operated a fraction of their usual flights to/from India as the government suspended regular scheduled operations and entered into air bubble agreements that permitted only limited operations.
  • The combination of a decline in revenue of around 60–65% to INR8.7 billion (USD117 million) and the limited cost cutting opportunities is estimated to have resulted in a consolidated loss of INR9.0–10.0 billion (USD121-135 billion) for third party ground handlers in FY2021. Larger operators will require cumulative funding of more than INR4.4 billion (USD59 million) to address the shortfall in FY2021.
  • In FY2020, Indian airlines, and foreign carriers transiting India, spent INR156.6 billion (USD2.2 billion) on aircraft Maintenance, Repair and Overhaul (MRO) services, of which only around 10% was retained in India. In FY2021, the size of the MRO market is estimated to have suffered a decline of nearly 35% y-o-y to INR95.5bn (USD1.3 billion).
  • Following an economic contraction of around 8% in FY2021, GDP is expected to grow by 8-9% in FY2022 bringing it more or less in line with where it stood in FY2020. In effect there will have been two lost years of economic growth. Economic disruption related to the second wave may be limited to Q1 of FY2022 assuming that there is no third or fourth wave. However, certain sectors are likely to be have been particularly badly hit, not least of all aviation and travel, and this is likely to result in longer term job losses which will impact consumption going forward.

Outlook for Indian Airports in FY2022
  • After taking into account the impact of the second wave, CAPA Advisory’s proprietary forecasting model projects domestic airport traffic of 160-190 million airline passengers in FY2022, up from 105 million in FY2021, but well below the close to 140 million passengers in FY2020. Our forecast of 160-190 million airport passengers is equivalent to 80-95 million airline passengers, each of which are counted twice, once at the departure airport and once at the arrival airport. This projection does not take into account a third wave. Although our forecast ranges between 160 million and 190 million, and bearing in mind the considerable uncertainty that exists in the market, our guidance based on currently available information is for traffic towards the bottom end of the range at around 160 million. As was the case in the second half of FY2021, we expect to see rising confidence and continued traffic recovery in the second half of this financial year.
  • International traffic is projected to be in the range of 16-21 million passengers, and again, based on current settings it is likely to be constrained towards the lower end of the range because of border restrictions, market access and other strategic risks. PPP airports are expected to handle around 76% of the international traffic in FY2022. However, international traffic will be particularly sensitive to discrete decisions taken by governments on such matters, which cannot be predicted. As with domestic traffic, the second half of the year is expected to be far more positive. Partly due to the easing of restrictions and the expansion of bubble agreements, but also due to the prospects of increased international capacity deployment by Indian carriers.
  • Domestic traffic is expected to increase by 53.7% year-on-year in FY2022, but will remain 41.2% below FY2020 levels. Among PPP airports, Hyderabad is expected to recover closest to pre-COVID traffic at -31.3%, while Mumbai will be the furthest behind at -52.3%. CAPA Advisory’s model shows Mumbai’s recovery underperforming other metro airports. This is based on the actual traffic performance in Q1FY2022. However, it may be possible for the airport to accelerate during the year and achieve higher volumes.
  • International traffic is projected to increase by 60.4% year-on-year in FY2022, however given the very low base, passenger numbers will remain 75.5% below FY2020, with all PPP airports within a range of about 5ppts either side.

Change in passenger traffic FY2022 vs. FY2021 and FY2022 vs. FY2020 INDICATIVE ONLY FOR STRATEGIC REASONS

Delhi Mumbai Bangalore Hyderabad Chennai Kolkata India

Domestic Pax

FY22 vs. FY21

52.1% 62.5% 52.7% 63.0% 74.4% 30.1% 53.7%
Domestic Pax FY22 vs. FY20 -40.4% -52.3% -42.6% -31.3% -48.1% -48.3% -41.2%
International Pax

FY22 vs. FY21

50.7% 93.4 117.9% 77.0% 106.0% 351.3% 60.4%

International Pax

FY22 vs. FY20

-72.9% -80.9% -77.9% -74.0% -79.0% -78.0% -75.5%
  • However, cargo is expected to recover to above pre-COVID levels. Domestic cargo is expected to increase by 43.0% year-on-year in FY2022 to 1,361,615 tonnes (2.7% above FY2020) while international cargo is projected to grow 35.9% year-on-year to 2,068,224 tonnes (3.2% above FY2020).
  • Although traffic growth at PPP airports in FY2022 will drive higher non-aero revenue higher by 28% to INR46.1 billion (USD620 million), this will remain almost 50% below pre-COVID levels. Due to its relatively high share of international traffic, Delhi Airport is expected to achieve a stronger recovery and could reach 70% of its pre-COVID non-aero revenue. Retail spend per passenger is expected to remain largely unchanged in FY2022 relative to FY2021, although this will be 20-35% less than FY2020. Food and beverage is expected to see a recovery, but duty free may actually decline due to the resumption of travel by low yield passenger segments, which will dilute overall spend.
  • Having made a valuable contribution to airport financials in FY2021, cargo will remain an important segment in FY2022. In sharp contrast to passenger traffic, both domestic and international cargo volumes in FY2022 are projected to be around 3% above FY2020 levels. Domestic cargo capacity will increase substantially in the second half of the year as the number of passenger services climbs. However, international capacity will remain constrained due to limited passenger demand. Although cargo yields at major PPP airports are expected to moderate in FY22, they are likely to remain above FY20, driving higher revenue.
  • In FY2022, major Indian airport operators are likely to report a combined loss of about INR70.1 billion (USD943 million), comparable to the loss in FY2021. Total revenue is expected to reach INR97.7 bn (USD1.3 bn) in FY2022, equivalent to 42.2% of the pre-COVID level. Meanwhile, operating expenditure is expected to increase by 6% in FY22, reaching 91.4% of the pre-COVID level.
  • Indian airport operators will require INR118.3 billon (USD1.6 billion) of additional funding to meet working capital, capex and debt service obligations in FY2022. Significant capex outflow is planned. The industry, including the AAI, plans to spend INR134.4 billion (USD1.8 billion) on capital expansion projects in FY2022. Given capex funding was diverted to fill the gap created by revenue loss during FY2021, additional capital for capex will need to be raised in FY2022.
  • Indian airport operators are highly leveraged with limited scope to increase debt. Given the need to raise capital as a result of COVID (especially to finance non-aero losses and capex), financing will therefore need to come in the form of equity. If incumbent promoters are unable to infuse the necessary funding this may lead to changes in ownership and precipitate a second wave of consolidation in the airport sector.
  • In FY2022, revenue of major third-party ground handlers is estimated to be around INR9.1 billion (USD122 million), or 35.0–40.0% of FY2020 revenue. With revenue plummeting and a largely fixed cost base, losses for major ground handlers will be around INR7.1 billion (USD96 million). These leading ground handlers would require cumulative funding of more than INR9.2 billion (USD124 million) to tide over the shortfall of FY2021 & FY2022. Two years of losses will significantly dent the balance sheets of ground handlers. In CAPA India’s assessment, this will impact their creditworthiness, and by extension their ability to raise debt in FY2022. Financing will primarily need to be provided by their shareholders.
  • MRO revenue in FY2022 is expected to be little changed to FY2021, at INR95.0 billion (USD1.3 billion), some 35% below FY2020. However, recovery towards pre-COVID levels may be possible in FY2023.

Click here to know more or order your copy of the CAPA India Aviation Outlook FY2022