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Thursday, 07 January, 2021, 16 : 15 PM [IST]

ICRA maintains negative outlook for airports sector

Credit rating agency ICRA Ltd has maintained negative outlook for the airports sector. Shubham Jain, Senior Vice President, Corporate Ratings, ICRA said, “The path to recovery in case of airports is longer; domestic air travel is expected to recover back to pre-Covid levels by FY2023 and the international sector by FY2024. The air traffic is expected to pick up gradually reaching to almost 80% of the pre-Covid levels in FY2022, resulting in a revenue growth of 106% in FY2022. Slow ramp up in traffic would affect the cash flows available for debt servicing for airport operators adversely. This, along with large bullet repayments, is expected to result in a thin DSCR cover in FY2022. However, the on-balance sheet liquidity for the airports is strong to meet the debt obligations.”

Given the significant delays in tariff orders in the past, timely tariff orders from the regulator, which adequately compensates for the capex and revenue loss due to Covid, remains critical from the credit perspective. Deterioration in credit profile of airlines could result in elongation of a receivable cycle for airport operators, thereby exerting pressure on cash flow from operations.

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