According to an ICRA analysis, worldwide air passenger traffic is predicted to expand by 8-11% year on year to about 407-418 million in FY2025. The expansion, it noted, will be backed by a robust increase in both leisure and business travel, improved connectivity to newer locations in the domestic segment, and a continuous increase in international tourism. In FY2024, passenger traffic had already reached 376.4 million, up 15% year on year and 10% higher than the pre-Covid level. According to an ICRA poll, the sample set's revenues are expected to expand by 15-17 percent year on year in FY2025.

Vinay Kumar G, Vice President & Sector Head, Corporate Ratings, ICRA, stated, "The rebound in Indian airport passenger traffic is among the best when compared to other major global peers. India accounted for 4.2% of global passenger traffic in 2023, up from 3.8% in 2019. While worldwide passenger traffic recovered to only 96% of pre-Covid levels in CY2023, Indian airport passenger traffic rebounded to 106% of pre-Covid levels thanks to robust economic growth and the addition of new airport routes. The Indian air passenger flow is likely to exceed the worldwide trend."

The Airports Economic Regulatory Authority (AERA) sets tariffs at all major airports in the country, which are fixed for five years, commonly known as the control period (CP). The regulatory environment for the airports sector has evolved over the last four to five years, as seen by a reduction in tariff order implementation delays to less than 1.5 years for the third CP, compared to 3-3.5 years for the first and second CPs.

Furthermore, ICRA stated that airport operators, regulators, and other stakeholders have made significant headway in resolving long-standing concerns such as the cost of equity, return on security deposits, FX losses, and treatment of real estate profits. Furthermore, the difference in the amount of capex suggested by the operator and disallowed by the regulator decreased dramatically to roughly 10% during the third CP, from 25-30% during the first two CPs.

Regarding airport operators' performance, Vinay Kumar G stated, "The revenues of ICRA's sample set are likely to grow by around 15-17 percent YoY in FY2025, driven by sustained improvement in both domestic and international passenger traffic, tariff increases at some of the major airports, and ramp-up in non-aeronautical revenues. With solid profit margins, debt coverage measures are likely to remain comfortable, notwithstanding rising interest expenses and loan repayments associated with the commercialization of the capex program at some key airports. Airport operators' credit profile is expected to remain robust, bolstered by healthy accruals and ample cash.