Covid curbs push Airports Authority into loss for first time

To counter the pandemic, air transport was suspended from March 25 till May 24 which rendered zero traffic at AAI airports. Even after resumption of flights, traffic is yet to pick up at airports due to quarantine measures implemented by states and an overall fear of flying.

The Covid-19 pandemic is likely to push the Airports Authority of India (AAI) -- the only profit-making government-owned aviation entity -- into losses in FY21, for the first time since its formation in 1995, officials said.

The quantum of loss will depend on the extent of the effect of the pandemic on traffic flow at airports.

In February 2009, it was granted “Miniratna Category 1 PSE” status by the Centre. In FY20, the AAI clocked a profit of over Rs 3,600 crore over revenue of around Rs 14,367 crore.

To counter the pandemic, air transport was suspended from March 25 till May 24 which rendered zero traffic at AAI airports. Even after resumption of flights, traffic is yet to pick up at airports due to quarantine measures implemented by states and an overall fear of flying.

The airports authority’s revenue has been further squeezed as two private airport operators -- Delhi International Airport (DIAL) and Mumbai International Airport (MIAL) -- haven’t paid any fees to AAI for three months.

While DIAL has started paying from August, MIAL has moved court as it has invoked force majeure on revenue sharing for the entire year. The AAI, however, hasn’t agreed.

MIAL has moved the Delhi High Court seeking an injunction against the AAI seeking the same.

DIAL and MIAL under concession agreements with the AAI, signed during the privatisation process in 2006, have to pay a percentage of their revenue to the government authority.

DIAL pays 45.99 per cent and MIAL 38.7 per cent of its revenues as fees to the AAI. This forms a bulk of AAI’s revenue, making it one of the few profitable public sector units in the country.

“Twenty-five per cent of AAI’s revenues was contributed by the revenue share from privatised airports (Delhi and Mumbai) in FY18. Going forward, any reduction in the same can impact AAI’s revenues and profitability significantly. In addition, the development of more airports (greenfield as well as under UDAN scheme) as well as the privatisation of the existing one can adversely impact its revenues and margins, the impact of which will be assessed going forward,” rating agency ICRA says about AAI’s credit worthiness.

However, despite a fall in revenues, the airports authority will not reduce its capital expenditure plan as all public sector enterprises have been asked by the finance ministry to continue with the proposal in order to revive the economy. The AAI has earmarked around Rs 20,000 crore to be spent in the next five years, Rs 5,026 crore of it in FY21. It has spent Rs 4,950 crore in FY20 as capex.

“The AAI uses capex to build runway, terminals, and upgrade existing infrastructure. These kind of works create a lot of jobs and have an impact of the macro economy. Hence, the finance ministry has instructed us not to reduce that,” said a senior AAI official.

The need to continue capex has forced AAI to look for borrowings for the first time in its history, Civil Aviation Minister Hardeep Singh Puri said. “In order to meet the working capital requirements, AAI has taken fund-based working capital facility of Rs 1,500 crore from SBI,” Puri said.