A material increase in tariffs will help lift the aggregate operating profit of four private airports - Delhi, Mumbai, Hyderabad and Bengaluru - to 65 per cent of their pre-pandemic levels in next fiscal, Crisil Ratings said.
This fiscal, the operating profits of these airports are expected to plunge 90 per cent due to a vertical drop in passenger traffic.
The ratings agency, in a report, said these airports accounted for over 90 per cent of the air passenger traffic handled by private airports in India, and 55 per cent of all such traffic in calendar year 2020.
As per the report, three of these four airports are likely to see their aeronautical tariffs levied on the passenger traffic, cargo, airport landing and parking fee, more than double, on an aggregated average, from current levels.
Currently, the airport regulations allow the airports to get a fixed regulated return on the capacity addition being done in the control period, charged through tariffs.
Further, regulations also allow a true-up in the tariff to compensate for the loss in aeronautical revenue due to lower-than-expected traffic over the previous control period.
About one-third of the anticipated hike in tariffs is to compensate for the loss in aeronautical revenue due to lower than-expected traffic over the last and current fiscals.
The remaining two-thirds is to provide a fixed return on the capacity addition done in the current tariff control period of 5 years.
"The tariff hikes will help aeronautical revenue bounce back next fiscal to 1.3 times of fiscal 2020. However, these form only half of the overall revenue of these airports," said Manish Gupta, Senior Director, Crisil Ratings.
"The other half - non-aeronautical revenue - remains sluggish due to slow pick-up in passenger footfalls despite some relaxation in people movement, and low propensity of passengers to spend in the airport ecosystem at present. Consequently, overall revenue next fiscal will be lower than in fiscal 2020."
Besides, the report said that airports' slow revenue recovery will impact their operating profits which at best will reach 65 per cent of their pre-pandemic levels in fiscal 2022.
"This is contingent upon timely and adequate grant of tariff hikes based on petitions filed with the regulator by the airports," the report said.
"Airports are regulated monopolies and will therefore see traffic recover eventually, but the pace of recovery remains uncertain and dependent upon the Covid-19 wave and recovery in the travel preferences of people, especially for cross-border journeys."