Gouging passengers at airports to subsidise airlines

At the 65th annual general meeting and world air transport summit held in Kuala Lumpur in early June, Giovanni Bisignani, CEO of the International Air Transport Association (IATA) put India’s two largest airports — New Delhi Indira Gandhi International and Mumbai Chhatrapati Shivaji International on the ‘IATA Wall of Shame’ for their steep hikes of 207% in fees which, he said, added to the jeopardy of the aviation industry.

In parallel, for some time we have been hearing from airlines and their association IATA about India increasing its airport landing, parking and aero bridge (as called PBB) fees by 10% at a time when airports across Asia Pacific like Hong Kong International and Singapore Changi were reducing their fees by 10% or more, in a bid to attract or retain airlines.

Across the world, landing fees are based on the maximum take-off weight (MTOW) of an aircraft. When comparing the figures from Bengaluru International airport (BIA) and Singapore Changi airport, some very interesting numbers come up. It must be highlighted that the fees at all Indian airports are the same, so conclusions positive or negative apply to all airports in India equally, not just to BIA.

Indian airports are very cost effective in terms of their landing charges and their aerobridge charges. However, their parking charges for an overnight parking could best be classified as price gouging. God forbid an aircraft has a technical fault and is “aircraft on ground” (AOG). The airline will rue the day the parking bill comes to them.

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The pricing structure also reflects the lack of synchronisation between current realities and the policy framing at the Ministry of Civil Aviation. This is no longer the 1950s when flying was a luxury and international air travel was only for the super rich and famous. Air travel and air cargo, domestic or international, is a vital and integral part of any economic activity today and politicians and bureaucrats alike, need to rapidly time warp their policies to align with the realities of the 21st century.

In India, pricing is heavily skewed in favour of smaller aircraft operating domestic flights. For the same aircraft the landing fees for an international flight are 33% higher than a domestic flight, reflecting the legacy thinking that a person travelling abroad must have boatloads of money. Compare this with the fact that today a 3.5 hour international flight from Bangalore to Singapore and back is probably cheaper than a 2.5 hour domestic flight to Delhi and back. This skewed thinking extends all through the aviation chain be it passenger fees or taxation on aviation turbine fuel (ATF) which is at a ridiculous 28% in most states.

For narrow body operations Indian airports’ fees are 7% to 36% lower than Singapore, but for wide body operations India is more expensive by about 10% due to the 33% mark-up for international flights. For the Boeing 777-200 India is 10% cheaper than Singapore which is surprising when one considers the fact that Singapore Airlines is the world’s largest Boeing 777 operator.

The biggest surprise came when passenger paid fees are added up. In India, airport operators gouge passengers with passenger service fees topped off by User Development or Airport Development fees which are amongst the highest in the world. The 207% hike in fees Mr. Bisignani was referring to, is essentially borne by passengers. Populism is running amok here with international passengers being asked to fork out airport fees three times greater than their domestic counterparts. Surely an additional customs and an emigration officer does not dictate such an enormous hike in fees?

Let us face facts — there is no airport in India that can compare itself to those in Hong Kong, Seoul, Singapore, Kuala Lumpur, Dubai, Bangkok or Shanghai who are amongst the top airports in the world. The airports in India are monopolies, public or private does not matter, they are taking maximum advantage. Citing the slowdown in air travel, airport operators in India, government and private, are trying to increase charges and obtain the same income from the lesser number of travellers. It is like killing the proverbial golden goose, and Mr. Bisignani is right in his concern, air passengers are turning the Indian railways and various bus services in unheard of numbers.

At the same time, Mr. Bisignani should also introspect, India is not alone; globally, in this triangle of fees and charges, it appears that the airports and airlines have teamed up, leaving passengers to bear the brunt of airport income. Using IATA’s own definition of a “typical flight” i.e. 73% passenger load factor, comparing the total fees paid by passengers on a narrow body (Airbus A320 with 110 passengers) or a wide body (Boeing 747-400 with 271 passengers) flight :

  • In India :
    • On a narrow body domestic flight passengers pay $1,178 as fees or 345% of the $341 an airline pays
    • On a narrow body international flight passengers pay $2,749 or a mind boggling 631% of the $435 an airline pays
    • On a wide body international flight passengers pay $6,772 or 247% of the $2,744 an airline pays
  • In Singapore (only international flights) :
    • On a narrow body international flight passengers pay $2,096 as fees or 419% of the $500 an airline pays
    • On a wide body international flight passengers pay $5,164 or 203% of the $2,548 an airline pays

The skew is probably the worst in Europe with London charging a mind numbing $100+ per passenger in fees, and the United States is not much better, offering extremely crowded main airports with poor amenities compared to the fees they charge.

Despite the government in India announcing the formation of the Airport Economic Regulatory Authority (AERA), let us not be under any illusion — the AERA will have no representation from passenger rights groups, and will essentially mediate only the charges between airports and airlines, leaving passengers to increasingly bear the brunt of airport fees and charges keeping India’s air traveller numbers miserably low.

Additional source : Airport Authority (AA) of Hong Kong report.

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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