One of the airports slotted for an influx of infrastructure monies is 6-year-old Kunnar International
Private Indian airports are poised for significant expansion, with infrastructure investments expected to exceed Rs 60,000 crore (US$7.03 billion) during fiscal years 2025-2027. This represents a 12% increase from the Rs 53,000 crore (US$6.2 billion) invested during fiscals 2022-2024, as reported by CRISIL ratings.
The expansion aims to accommodate an additional 65 million passengers annually, with private airports’ revenue projected to grow at 17% between fiscals 2025 and 2027. This growth will be driven by increased passenger traffic, tariff adjustments, and enhanced airport services.
CRISIL’s analysis, which covers 11 private airports handling 60% of total passenger traffic and 95% of private passenger movement in fiscal 2024, indicates strong growth prospects. Manish Gupta, Senior Director and Deputy Chief Ratings Officer at CRISIL Ratings, notes that passenger numbers at Indian airports are expected to achieve a compound annual growth rate (CAGR) of 8-9% over fiscals 2025-2027, building from 376 million passengers in the last fiscal year.
The domestic air travel sector, which comprises over 80% of overall volume, is expected to benefit from rising business and leisure demand, along with government initiatives to increase air travel accessibility. The Ude Desh ka Aam Naagrik scheme has made significant progress, with 84 airports and 579 routes operational as of July 2024. While these regional connections currently account for 2% of domestic traffic, they serve as important feeders to metropolitan airports.
In addition to domestic travel, international passenger traffic is poised for growth, driven by increasing business activities, streamlined visa procedures, and expanded airline routes. This aligns with the broader infrastructure expansion plans, as airport operators aim to enhance facilities to cater to both domestic and international travelers. Systematic tariff adjustments, including a projected 15% increase in aeronautical tariffs during fiscals 2025 and 2026, are expected to play a crucial role in funding this growth. These adjustments not only ensure infrastructure cost recovery but also bolster revenue streams, enabling airports to meet rising demand while maintaining financial stability.
The expansion plans include development of additional facilities such as lounges, parking spaces, and retail outlets. According to Ankit Hakhu, Director at CRISIL Ratings, although approximately 70% of capital expenditure will be funded by debt, the credit profiles of private airports are expected to remain strong. This is supported by projected revenue growth driven by increasing passenger traffic, regulated aeronautical tariff increases, and growing non-aeronautical revenue.
Aeronautical tariffs are set to increase by 15% in fiscals 2025 and 2026, with aeronautical revenue, which makes up 50% of total earnings, expected to grow by 24% during fiscals 2025-27. Non-aeronautical revenue is projected to increase by 10% during the same period.
The financial health of these airports appears robust, with the debt service coverage ratio expected to improve to 1.45 times during fiscals 2025-27, up from 1.1-1.3 times during the pandemic years of 2021-23. Private airports have successfully raised over Rs 10,000 crore (US$1.71 billion) in the past two fiscals at favorable interest rates, despite increased repo rates.
However, the report also highlights potential challenges, including aircraft availability issues and geopolitical tensions that could affect fuel costs and passenger numbers. Despite these challenges, the regulatory environment has become more predictable, with systematic tariff adjustments supporting expansion costs and operational expenses.
REGION Asia