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Need to expand airports in APAC to keep up with rising passenger traffic: Moody's

Sustained growth in air passenger traffic across Asia Pacific will boost revenue for airports but also raise pressure on the infrastructure, according to a new report by Moody's Investors Service.


ANI New York
Updated: 13-07-2019 14:58 IST
Need to expand airports in APAC to keep up with rising passenger traffic: Moody's

The ability of Indian airports to grow revenue is limited by pressure on tariffs. Image Credit: ANI

Sustained growth in air passenger traffic across the Asia Pacific will boost revenue for airports but also raise pressure on the infrastructure, according to a new report by Moody's Investors Service. This will drive the need for capacity expansion and in turn, bring execution and funding risks.

"The Asia Pacific has been the fastest growing major aviation region globally since 2014, while air travel penetration -- as measured by the number of flights taken per capita -- remains well below that of mature markets in Europe and North America, suggesting strong further growth potential," says Spencer Ng, a Moody's Vice President and Senior Analyst. "At the same time, most rated airports in the region are already operating close to or above capacity, raising the need for capital expansion that they will very likely fund through incremental debt, pressuring their credit metrics," he said.

Moody's said the credit impact among the rated Asia Pacific airports will vary. Airports with limited ability to increase revenue by capitalizing on increasing passenger numbers, or that lack the capacity to introduce counter-measures if operating conditions deteriorate, will be most exposed to downward credit pressure. Among the three Asia Pacific countries in which Moody's rated airports, Indian airports are more exposed as their ability to grow revenue is limited by pressure on tariffs under the evolving regulatory environment and by their relatively lower EBITDA (earnings before interest, tax, depreciation, and amortization) margins.

By contrast, the rated airports in Australia are better positioned to manage the incremental risks associated with their expansion, given their track record of increasing revenue at a faster rate than passenger traffic growth. Australian airports are also expected to have the ability to cut back dividend payments to preserve financial metrics if required. Malaysia Airports Holdings Berhad (MAHB) is not directly exposed to expansion-related risk at present because the Malaysian government retains primary responsibility for developing new airport capacity. However, MAHB may start taking on greater responsibility in future expansion under the new concession agreement it is currently negotiating with the government.

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(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


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