Airliners-India.com

me111993 · Member Joined: 04 Sep 2009 Posts: 3225 Location: MAA/AMD

NEW DELHI: A proposal by the capital's airport operator to raise user tariffs by 6.4 times has set alarm bells ringing among foreign airlines who say they will be forced to look for alternatives to the New Delhi airport if these hikes are implemented.
The Airport Economic Regulatory Authority (AERA), the body that regulates private airports in the country, is expected to initiate stakeholder consultations on tariff proposals for Delhi and Mumbai airports soon. A senior official at the airport regulator said the GMR Group-owned Delhi International Airport (DIAL) has sought average hike of around 640%.
Mumbai International Airport (MIAL), led by GVK
Power and Infrastructure, has also sought a tariff revision from the airport regulator though it is not as steep as DIAL's. However, the exact range of the hike sought by MIAL from the regulator could not be determined. "There is no simplistic number to the airport tariff hikes asked by MIAL. They have presented multiple scenarios for our consideration
to boost their revenues, all of which entail a
variable impact on airport costs," said the AERA
official. Airport tariffs are largely paid by airlines and include charges levied for aircraft landing and parking, ground safety and handling services for passengers and cargo, and fuel supply for aircraft.
DIAL officials say they have asked for a revision of charges but refused to disclose the specifics of their proposal. "The tariff structure is very lop-sided. We will incur a loss of about Rs 800 crore this yea
because tariffs have not been revised since 2001.
So, we have asked for a revision in tariffs from the regulator," said Sidharath Kapur, GMR
Infrastructure's chief financial officer (airports). The Delhi airport's tariffs had been raised by 10% in 2009 as per the operation, management and development agreement (OMDA) it signed with the government and the Airports Authority of India (AAI).
But foreign airlines are clearly alarmed by the prospects of a significant hike in charges. Finnair's director for the Indian subcontinent Kari Stolbow said the proposed hikes could force airlines to shift base out of Delhi. "Delhi is an important destination, but this kind of move may force airlines to look around for other possibilities," he said, pointing out that flight frequencies to and from India on the
whole are growing faster than Delhi.
Stolbow's counterpart at Air France-KLM, Pieter De Man, said Indian airports like Mumbai and Delhi are already among the most expensive for airlines to operate from. "The rise in charges proposed could effectively result in airlines abandoning their operation to and from India," Air France-KLM's general manager for the Indian sub-continent said.
While abandoning operations may seem like an
extreme step, Malaysia-based low-cost carrier Air Asia had earlier this year ceased operating to and from Hyderabad after a revision in tariffs. Suresh Nair, Air Asia's regional manager (India, Sri Lanka and Bangladesh), believes the hike sought by DIAL would be dangerous for India's aviation business landscape as it will set a precedent for Mumbai airport developer MIAL, where GVK Infrastructure is AAI's private partner.
"Low-cost models, especially ours, don't work if cost of operations is high. If this hike happens, every airline will have to pass it on to customers and high fares are bound to dampen demand,"
Nair said. Whether they abandon the Delhi airport or not, airlines would most certainly recover the rise
in tariffs through higher airfares.
"Higher airfares result in a drop in demand. It is
evident that on the whole the aviation industry is
not profitable and actions such as these further
deteriorate the situation for the airlines and their customers," said De Man. Industry experts reckon
that every departing domestic passenger from New
Delhi airport indirectly pays around Rs 250-280 as
airport charges. If the airport regulator accepts
DIAL's proposal, these fees could go up to as high
as Rs 1,600-1,800 per passenger. But some analysts like KPMG's aviation director
Amber Dubey, say airport charges have been
amended only twice in the last decade, despite a
significant increase in capital expenditure and
operating costs. "AERA may consider a reasonable
increase in DIAL's tariffs. One option is to spread the increase over a long period using the present value
calculation. However, the period has to be aligned
with the tenure of DIAL's long-term debt," he said.
Another sector expert who did not want to be
named said that there was nothing unusual about
DIAL asking for a hike in airport tariffs. "Even Mumbai will do the same as it has a large capex
plan and every investor wants a return," he said.
DIAL has to share 46% of its revenues with the
government and to reduce its losses and turn the
corner, it wants user charges to be raised. It also
wants to finance further capital expenditure with additional Airport Development Fee (ADF) but the
Supreme Court stayed the collection of this fee and
termed it as a 'tax'.
In an August 2011 report, Bank of America & Merill
Lynch analysts Deepak Agrawala and Bharat
Parekh put an 'Underperform' rating on GMR Infrastructure. They said tariff determination by the
AERA would be 'key to the turnaround in profits'.

picket this up from ET.
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stealthpilot · Member Joined: 19 Dec 2006 Posts: 2325 Location: BLR, DXB

So from Rs.250 it could go up to 1500??
Shocked

... Id have a hard time believing the AERA would accept that.
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