Performance Slump: Airports witness drop in air traffic growth

Airports witness drop in air traffic growth

Over the past six years (2013-14 to 2018-19), air passenger traffic grew at a compound annual growth rate of 15.32 per cent. The market has more than doubled in size from 169 million in 2013-14 to 344.7 million in 2018-19. The growth has been led primarily by the domestic passenger segment, which grew from 122.4 million in 2013-14 to 275.22 million in 2018-19. There was a marked growth in the international passenger segment as well that grew from 46.6 million in 2013-14 to 69.48 million in 2018-19, though this was somewhat constrained vis-à-vis the domestic segment due to bilateral restrictions and the inability of domestic airlines to grow significantly in international markets. Overall, traffic growth was also due to increase in the number of operational airports from 70 in 2016 to about 106 in 2019.

Passenger traffic trends at key airports          

The passenger segment saw a very high year-on-year increase in 2015-16 and 2016-17. This trend continued in 2017-18 as well, though it reversed in 2018-19. A key reason that contributed to this was the operational problems faced by many airlines, including a significant loss of capacity on account of the grounding of Jet Airways. However, other airlines such as IndiGo still grew at a very high year-on-year rate.

In 2018-19, Delhi airport retained its leading spot by handling the maximum passenger traffic, followed by Mumbai and Bengaluru.

While most airports saw an increase in passenger traffic, Cochin airport saw a slight decrease. This was due to floods in Cochin, as a result of which the airport was closed for 15 days.

India Infrastructure Research has tracked the performance of 13 key airports – Delhi, Mumbai, Bengaluru, Chennai, Kolkata, Hyderabad, Ahmedabad, Cochin, Pune, Goa, Guwahati, Lucknow and Jaipur. These airports together carried a combined 272.76 million passengers in 2018-19, growing by 9.63 per cent from 248.81 million passengers in 2017-18.

Among the six joint venture (JV) airports – Delhi, Mumbai, Nagpur, Cochin, Hyderabad and Bengaluru (excluding Kannur airport) – that together accounted for about 50 per cent of the total traffic in 2018-19, Nagpur airport witnessed the highest growth of 28.2 per cent in passenger traffic followed by Bengaluru airport that grew at 23.8 per cent. At the same time, Hyderabad airport grew at 17.9 per cent, Delhi airport at 5.4 per cent and Mumbai airport at 0.7 per cent.

With respect to airports handling 2 million-5 million passengers per annum (mppa), the Biju Patnaik International Airport (BPIA) in Bhubaneswar bagged the best airport award in terms of airport service quality, given by the Airport Council International, and handled about 4 million passengers in 2018-19. Meanwhile, airports at Guwahati, Lucknow and Jaipur have crossed the 5 million passenger mark for the first time. Some airports witnessed exponential growth during the year. Surat airport, for instance, grew at the rate of 81.8 per cent year on year recording 1.25 million passengers, a first among Indian airports.

During the period April-July 2019, key airports witnessed a mixed response with major airports such as Delhi and Mumbai witnessing a sharp decline of 8.1 per cent and 9.7 per cent, respectively, due to increasing airfares witnessed after the grounding of Jet Airways and of A320neo aircraft (powered by Pratt & Whitney engines). In contrast, the Bengaluru (3.4 per cent), Hyderabad (6.6 per cent), Ahmedabad (5.5 per cent) and Goa (6 per cent) airports maintained a decent growth momentum. Nagpur airport, in particular, recorded strong growth of 18.9 per cent.

Kannur airport, a JV airport commissioned in December 2018, handled over 0.03 million passengers during April-July 2019.

Cargo traffic

Cargo traffic witnessed double-digit growth in 2016-17 and 2017-18 but the growth reduced to 6 per cent in 2018-19 when 3.5 million tonnes of freight was handled. This slowdown was primarily driven by the international cargo segment, which accounts for 62 per cent of total cargo traffic, that grew only at about 2.6 per cent against the growth rate of 15.6 per cent in 2017-18. This slump in cargo traffic is due to weak global trade and intensifying trade disputes between the US and China. In variance with this, domestic freight traffic grew at 12.1 per cent, up from 8.1 per cent in 2017-18.

During the April-July 2019 period, all major airports including Chennai, Kolkata, Mumbai, Bengaluru, Delhi and Pune recorded a decline in the freight handled as compared to that carried in the same period the previous year. The maximum decline of 38.6 per cent was recorded at Pune airport. This was despite the fact that a transshipment facility was operationalised at the airport in March 2018 as exporters prefer to transport cargo to the Mumbai international airport directly.

Capacity utilisation

Currently, Indian airports have a capacity of over 356 mppa, of which the JV airports at Bengaluru, Cochin, Delhi, Hyderabad, Mumbai and Nagpur comprise a capacity of around 178.57 mppa. There are significant inter-airport capacity variations. Non-metro airports such as Kanpur, Nagpur and Patna are witnessing overutilisation, while some airports such as Aurangabad, Bhopal and Jamnagar have not reached even 30 per cent of their capacities. With regard to metro airports, the Hyderabad and Mumbai airports are also over- or fully utilised.

Revenue earnings

Revenues earned by airport operators, both aeronautical and non-aeronautical, are another key component of the performance matrix. In 2018-19, Delhi airport, for instance, recorded a year-on-year decline of 42 per cent in aero revenues (include passenger service fee, and landing and parking charges) to Rs 9.87 billion due to slashing of airport tariffs by up to 90 per cent from July 2017 onwards for the ongoing control period. On the other hand, non-aeronautical revenues which includes retail stores, food and beverage kiosks and advertising were up 16.2 per cent year on year to Rs 20.91 billion on account of higher passenger footfalls at the airport.

Similarly, Bengaluru International Airport Limited (BIAL) posted a 22.5 per cent year-on-year decline in profit after tax to Rs 6.56 billion for financial year 2018-19 due to the lower user development fee (UDF). In the previous year (2017-18), the airport operator had reported

Rs 8.46 billion in profits. While passenger footfalls at the Kempegowda International Airport (KIA) jumped 23.8 per cent in 2018-19, operating revenues were down 3 per cent year on year to Rs 15.05 billion as the Airport Economic Regulatory Authority slashed the UDF for domestic and international passengers by 67 per cent in August 2018.

Future outlook

Airport performance is crucial for airlines, air traffic controllers and operators to anticipate traffic levels and make projections for the future. It acts as a benchmark for planning the required future capacity additions and ensures timely creation of new capacity as well as augmentation of existing capacity. However, other efficiency indicators such as on-time performance and hassle-free transfers are also necessary to improve the passenger experience. In this regard, measures such as online check-in facilities, DigiYatra (biometric-based digital processing of passengers) and AirSewa (common platform for air travellers to submit air travel-related grievances) have been taken but more needs to be done. Further, issues related to revenue leakages due to changes in the UDF and suboptimal exploitation of real estate need to be addressed.

Airport performance is crucial for airlines, air traffic controllers and operators to anticipate traffic levels and make projections for the future.