MUMBAI: Domestic airports and ports as also those elsewhere in Asia face credit risks if the Iran war that entered the second week, lasts longer, a foreign rating agency has warned.
According to Fitch Ratings, domestic airports and ports could face near-term traffic volatility if disruption to the West Asian airspace persists as Middle East is an important and sizeable source of air traffic into the country and a hub for Europe- and US-bound connectivity, which would be sensitive to prolonged closure or restriction of West Asian airspace.
“This could also reduce airports and ports traffic through cancellations, diversions and longer flying/shipping times. Short‑lived disruptions can generally be absorbed, but an extended closure would heighten downside risks to revenue and margins,” Fitch analysts warned Wednesday.
They also expects some volume pressure on domestic ports if the conflict persists due to higher freight costs, economic slowdown and port congestion from schedule disruptions, although the impact should be manageable.
Domestic port operators have limited exposure to crude and liquefied natural gas-related cargoes (around 5% for Adani Ports and JSW Infrastructure), while the contribution of overseas operations with higher exposure to the conflict is limited to less than 10% of group operating income.
While for ports closure of the Strait can lead to higher freight costs and general slowdown, and congestion leading to volume and margin pressures, for ports lower volume to and fro West Asian markets could reduce airtraffic movement, and passenger volumes and longer flying time could compress margins more so given the rising fuel prices.
Other ports and airports elsewhere in the Apac region could also face mixed but increasingly negative credit effects if Iran-linked shipping and airspace disruption persists, Fitch said.
Congestion can lift some storage and ancillary income at container ports, but weaker schedule reliability typically raises unit costs and reduces productivity, pressuring margins at operators with high fixed costs. The main tail risk is a prolonged closure of the Strait of Hormuz, which would amplify volume and cost shocks across energy, bulk and container supply chains, they added.
Ports face network disruption, such as re-routing, blank sailings and vessel bunching, which can create short-term congestion and longer dwell times, but also increases yard re-handling, labour and equipment costs and can reduce berth and yard productivity. Demand effects can follow as higher bunker and war-risk insurance costs lift freight rates and delivered costs, delaying cargo decisions and weakening trade volumes.