The annual air traffic growth in India is expected to moderate to 8-10 per cent over the next two years, rating agency Moody's Investors Service said today.
In a report, Moody's said that major airports in India have been registering a strong rise in passenger traffic -- which has recorded two years of 20 per cent plus growth.
"The two years of growth in domestic air traffic has made India the third largest domestic aviation market after the US and China," said Abhishek Tyagi, a Moody's Vice President and Senior Analyst.
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Rising middle class, lower air ticket prices and improving regional connectivity have been the main drivers for the growth.
"We expect air traffic growth to moderate but still remain healthy at 8-10 per cent annually over the next two years, compared with much lower growth in other countries in the region," he said.
According to him, all major Indian airports are operating at close to or above design capacity because of this big increase in traffic.
The report, titled 'Airports -- India, Traffic growth credit positive, but regulatory environment a challenge', said that large airports in the country are expected to bring forward plans to expand capacity.
However, the scale and complexity of expansion projects could affect the airports' capacity to manage unexpected challenges, such as a sharp cut in tariffs.
"This situation would reduce revenues and cash flow, and limit the airports' flexibility to defer spending once any expansion work commences," the report said.
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