India's air traffic records two years of 20%-plus growth
India's major airports are seeing a strong rise in passenger traffic, which has recorded two years of 20%-plus growth, rating agency Moody’s Investors Service said in a report released on November 30, 2017. As for now, all major Indian airports are operating at close to or above design capacity because of this spike in traffic.
A growing middle class, lower air ticket price and improving regional connectivity are the main drivers of passenger volume growth in India, the report said.
“The two years of growth in domestic air traffic has made India the third largest domestic aviation market after the US and China,” Abhishek Tyagi, a Moody's Vice President stated.
According to the report, large airports in India may consider expanding their capacity to meet growing demand, but the scale and complexity of expansion projects could affect the airports' capacity to manage unexpected challenges, such as a sharp cut in tariffs, “which could reduce revenues and cash flow, and limit the airports' flexibility to defer spending once any expansion work commences.”
Although the Indian government announced a number of initiatives over the last year to encourage air travel and improve regional connectivity, the regulatory regime in India for airports is relatively new. So far, the Airports Economic Regulatory Authority Of India has approved tariffs for most airports only for the first five-year regulatory period.
Moody predicts that the annual air traffic growth in India is expected to decrease to 8-10 % over the next two years, but the company emphasizes that this number is still high, compared with much lower growth in other countries in the region.
Thus, according to IATA's report made in September 2017, carriers in the Asia-Pacific region are seeing a slowing of demand growth. Asia-Pacific airlines' July 2017 traffic rose 5.9% over the year-ago period, a deceleration compared to June growth of 8.8%.