Omicron Could Push Air Traffic Recovery Into Fiscal 2024: CRISIL

The Omicron-led third wave of the pandemic could pose fresh turbulence for air traffic, pushing full recovery1 into fiscal 2024 from our earlier expectation of it happening in fiscal 2023, CRISIL has stated.

"A material impact on the credit quality of airport operators, however, is unlikely as the dip in revenue is expected to be limited by a likely strong rebound and operators have adequate debt servicing cushions, liquidity buffers and financial flexibility to absorb the blip in traffic.

An analysis of the top four private airports - Delhi, Mumbai, Bengaluru and Hyderabad - which accounted for ~90% of air passenger traffic handled by private airports and ~50% of all passenger traffic last fiscal, indicates as much," CRISIL has stated.

Says Manish Gupta, Senior Director, CRISIL Ratings, "The high infection rate of Omicron has resulted in several state governments and local authorities, such as Delhi and Mumbai, announcing restrictions on movement. In fact, domestic traffic is down by 25% from the highs of December 2021 in the first week of January 2022 itself. Both personal and business travel will take a hit in January and February, leading to air traffic plunging an estimated 30% sequentially in the fourth quarter of this fiscal2."

This spill-over impact is likely to delay recovery of air traffic from our earlier expectation of it happening in fiscal 2023. However, recovery is expected to be achieved within early part of fiscal 2024. This is because air traffic is likely to rebound faster this time around, compared with the second wave, when it took from May to November 2021 to recover from ~16% to 85% of the fiscal 2020 traffic.

The rebound confidence is underpinned by higher proportion of vaccinated populace - over 71% now vis-à-vis only ~5%3 as of end May 2021 - as well as learnings of governments and authorities from the past waves in implementing Covid-19 protocols for safe travel. The caseload, too, is expected to peak in February and return to the December 2021 level by the end of March 2022.