Govt rejects airports fees hike proposal

21 May 2008, Saurabh Sinha
Source : The Times of India

NEW DELHI: Coming to the rescue of domestic airlines, government has decided not to accept GMR and GVK’s proposals to hike Delhi and Mumbai airport charges by 10%.

The privatisation pact allowed both the GMR and GVK groups — which are modernising these airports — to increase aeronautical charges levied on airlines and passengers, after two years of taking over the projects.

With rising oil prices putting airlines under severe financial stress, aviation minister Praful Patel has decided not to allow this hike for time being, as this move would increase pressure on the industry. “It is not an easy time for airlines because of high aviation turbine fuel (ATF) prices. While average air fares are lower than 2004 levels, ATF is six times more expensive now from that time. Airlines are making huge losses and any further burden like higher aeronautical charges will not be allowed till the situation improves,” Patel told TOI.

The monthly ATF price hikes alone have led to airlines imposing such steep fuel surcharges that flying has again become costlier and growth is falling from double digits. “Airlines have inducted large number of planes in last four years. Because of high fares, load factors are falling. Now airlines are not going to add much capacity this year and for the first time in past three years, growth is being curtailed to single digit,” Patel said.

From the heady 20% to 30% domestic sector growth recorded in past three years, this April recorded a 8.65% increase in passengers traffic over same month last year. Patel warns that unless states reduce sales tax on ATF and surcharges fall, growth could stick to single digit level. “Globally, ATF accounts for 15 to 17% of total operating cost of an airline. Here jet fuel contributes to 40 to 45% of operating cost, which is among the highest in the world,” he said.

On an average, the proposed 10% hike would have meant an increase of Rs 20 for a passenger. For departing passengers, this will mean a hike of Rs 10 in the existing passenger security fees of Rs 225 paid by fliers at the time of booking tickets as also higher car park charges, said sources. For incoming passengers, it would mean paying more to cover the higher landing and parking charges levied on airlines by the developers.

Airlines made it clear that they would not be able to absorb any extra cost and would pass everything to passengers. The Delhi and Mumbai airports were allowed to charge 10% higher aeronautical charges from third year and the fourth year charges will be determined by either the Airport Economic Regulatory Authority (if in place by then) or by the civil aviation ministry. But for now, the government has made it clear it can’t allow a 10% hike.

About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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