Mumbai: Indian airports may not be well equipped to tackle a widespread impact of coronavirus as they focus more on substantial expansion programmes, according to a Moody’s Investors Service report released on Thursday.
These airports use most of their cash flow from operations to fund the programmes and rely on debt, Moody's said.
The credit ratings agency also said though the spread of the disease poses immediate challenges to airport revenue growth in the Asia-Pacific region, the fundamentals of these businesses are likely to remain intact and sustainable over long term. This reflects their strong market positions as essential service providers and leverage to rising incomes.
Airports in the region can weather challenges to their revenue due to the spread of the virus, despite international travel restrictions and route suspensions threatening their financials in the short term.
“Whilst travel to and from mainland China still accounts for less than 4% of total Asia-Pacific passengers, the financial impact on airports is larger than suggested by passenger numbers, as they typically generate substantively higher revenue from international passengers than from domestic ones," said Nicholas Chapman, vice-president and senior analyst, Moody's.
Though it is too soon to determine the impact of coronavirus on domestic and non-mainland China-related travel, past experience including that of the 2003 SARS outbreak, suggests that travel between Asian destinations could significantly take a hit for at least the next two-to-three quarters.
“Nevertheless, most rated airports in Asia Pacific generate solid free cash flow and are able to defer investment programmes, providing them with a buffer against a short-term decline in aviation demand," added Chapman.
Existing visas, including eVisa, issued to mainland China nationals before 5 February by India have been invalidated. Passengers who have been in mainland China after 15 January are not allowed to enter with any visa into India. Meanwhile, state-owned carrier Air India has suspended flights to Shanghai until mid-February and reduced service to Hong Kong. InterGlobe Aviation Ltd-led IndiGo has also suspended its services to Chengdu and Hong Kong.