The sharp drop in passenger traffic that is being witnessed by Delhi Airport, if prolonged, will pressure its credit metrics, revealed Moody’s Investors Service.

In a report that was released on Thursday, the US-based financial firm said the fall in passenger traffic for Delhi Airport over the past two months is a sharp turnaround from the average annual increase of 15 percent between 2016 and 2018.

DIAL's (Delhi International Airport Limited) credit metrics are already likely to stay at the lower end of the range considered appropriate for its Ba2 ratings, because of additional debt incurred to fund its major expansion program and Moody’s base case assumption that tariffs will remain at around the current low level.

"The decline in traffic is credit negative for DIAL because most of its revenue is linked to passenger and aircraft movements at the airport…Nevertheless, our base case scenario assumes that the downward pressure on DIAL's passenger traffic will gradually dissipate in the remaining months of the fiscal year ending March 2020, and passenger traffic will grow at a high single-digit percentage annually over the next 2-3 years,” said Spencer Ng, Moody’s vice president and senior analyst.

Earlier, the Airports Authority of India published data which revealed that passenger numbers at the airport fell 12 percent in May 2019 versus May 2018, after a 15 percent decline in April 2019.

With the passenger traffic at the airport predicted to grow at a single-digit percentage for the next two-three years, according to the Moody’s release. This, the report added, could pose a big challenge to the airport that depends mainly on passenger traffic for revenue.

As per the report, the decline in passenger traffic was primarily driven by the suspension of Jet Airways’ operations that led to scarcity in seat availability and an increase in the ticket price. Further, global economic slowdown and the grounding of 737-Max 8 aircraft too played its part.