Private Indian airports lag global counterparts in non-aero revenue: Icra

NEW DELHI: Non-aeronautical yields for major private Indian airports significantly lag their global counterparts as the second wave of covid-19 pandemic delayed a recovery in passenger traffic, rating agency Icra Ltd. said on Thursday.

Non-aero yield per passenger for major private airports in India stood at $3.8, much lower compared to yield per passenger of $5.7-$16.4 for other major airports across the world, Icra said.

"On the non-aeronautical revenues, the major private airports in India have witnessed growth at a CAGR of 12% in during FY17-20. Along with this, reduction in aeronautical revenue share due to decline in tariffs has resulted in change in aeronautical to non-aeronautical mix at major private airports from 67:33 in FY2017 to 49:51 in FY2020," Icra said.

"The non-aeronautical revenue share further increased to 57% in FY2021 due to higher impact of pandemic on aeronautical revenues. As against this, the revenue mix at Airport Authority of India (AAI) operated airports is dominated by aeronautical revenues which constitutes 78% of revenue mix as focus is less on non-aero yield due to low passenger throughput at majority of tier II and tier III airports, lower international traffic and relatively low spend by the travelers," it added.

Non-aeronautical revenues entails income of the airport concessionaire that come from fees, charges, tariffs and other levies. These are typically revenues from sources other than airlines like retailers setting shop at airport, car parking, etc.

Aeronautical revenue is generated from regulated charges levied at the airport like landing fees, parking and housing fees, PSF (Facilitation) and user department fees.

According to Icra, revenue streams for an Indian airport operator are primarily divided into aeronautical, non-aeronautical and real estate revenues.

Aeronautical and non-aeronautical income contributes to majority of the revenues as real-estate income currently contributes to less than 5% of total revenues for major private airport operators, Icra added.

“The average non-aero yield per pax for major private airports in India stood at US$3.8 (even lower at US$ 2.9 if AAI operated airports are included) during FY2018 – FY2020 (FY2021 not considered due to Covid impact) compared to yield per pax ranging between US$ 5.7 to US$ 16.4 for major airports across the world," said Rajeshwar Burla, vice president and group head, Corporate Ratings, at ICRA.

"Given the evolving consumer spending behaviour, Indian airports still have a significant room for improvement. The aeronautical revenues are regulated in nature, where returns are capped; therefore, to maximize the return on capital employed, airport operators need to improve their non-aero yields," Burla added.