Mumbai: Cathay Pacific Airways Ltd increased flights to 35 a week from just four in 2008 to take advantage of the boom in air travel from the country. Now, it’s thinking of reducing flights, especially to Delhi. Not because of the slowing economy, but because of a proposed tariff hike by the Delhi airport.
Poor visibility: Tom Wright, general manager (Middle East, South Asia, Africa), Cathay Pacific.
Indian flights don’t rank at the top in terms of profitability, said Tom Wright, 56, general manager, South Asia, Middle East and Africa, for Cathay Airways, which first began flying to the country 30 years ago.
“We are evaluating what the proposed tariff hike at Delhi airport will do to our profitability,” Wright said. Cathay currently operates in Mumbai, Delhi, Chennai and Bangalore.
Apart from the proposed tariff hike in Delhi, flying rights are another concern. Like most foreign carriers, Cathay Pacific wants to cover more destinations in India, but the government is reluctant to allot more bilateral rights since local carriers are cash-strapped and won’t be able to start flights from the same airports to offer competition.
Wright said Cathay Pacific is not alone in being concerned about the proposed tariff increase by Delhi International Airport Pvt. Ltd (DIAL). “Various other foreign carriers have indicated that they will either reduce or withdraw operations from Delhi airport,” Wright said.
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With Delhi airport planning a steep hike in tariffs, Cathay Airlines’ Tom Wright says carriers including his, are reconsidering flying to Delhi
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According to the International Air Transport Association (Iata), which represents some 240 airlines accounting for 84% of the total air traffic, Delhi airport will become the most expensive airport in the world if the regulator approves the increase.
The GMR Group-promoted DIAL, which runs the airport, has sought an increase of 774%, while the Airport Economic Regulatory Authority, or Aera, has proposed a hike of 334%, Iata assistant director Malvyn Tan said.
The rate is for a Boeing 747-400 and includes charges for landing, parking, boarding bridge, baggage and security.
Aera held a consultation meeting on 18 January with all stakeholders ahead of releasing the final order raising tariffs.
Tan of Iata said there was a need to look beyond financial numbers and wanted the original agreement for operations and management to be reviewed.
Aera should also take into consideration the impact of proposed increase on consumers, said B.V. Selvaraj, principal secretary, national capital territory of New Delhi. Government bodies should subsidize rates that Delhi airport is charged towards this end, he said.
The airports at Delhi and Mumbai are being modernized at a cost of at least $6 billion (Rs 29,700 crore today) and part of this is being recovered from airlines and passengers.
On 12 January, Malaysian low-fare carrier AirAsia X Sdn Bhd said it would withdraw its services to India from its Kuala Lumpur hub by March-end, citing a steep increase in costs at Delhi and Mumbai airports.
According to the minutes of the Aera meeting that are posted on its website, the representatives of Deutsche Lufthansa AG, Air France-KLM, British Airways Plc, Emirates and Singapore Airlines opposed the increase proposed by Aera.
Pieter De Man, general manager, India subcontinent, Air France, said airlines may even cease operations in Delhi due to these extreme cost factors. Airlines may even cease their operations to Delhi “due to these extreme cost factors,” he said.
Axel Hilgers, Lufthansa’s South Asia director, said in an email statement to Mint that “any increase in airport user charges would be unreasonable and counterproductive”.
British Airways, Emirates and Singapore Airlines did not offer any comment.
Cathay Pacific’s Wright said his airline always wanted to look beyond the Delhi and Mumbai markets, but current bilateral entitlements restrict them from doing so.
According to the ministry of civil aviation, the utilization of Indian carriers in 2010-11 of the total entitlement envisaged in various bilateral air services agreements is around 20%.
The government is giving priority to Air India Ltd and new bilateral rights will be allotted based on the plans of the state-run carrier that has accumulated losses of at least Rs 20,000 crore in the last four fiscal years, said a senior aviation ministry official without wanting to be named.
The financial condition of Indian carriers is restricting the opening of new international departure and arrival points in India, Wright said.
However, he is positive on the potential of the Indian market. Cathay Pacific has restarted the hiring of Indian cabin crew after 15 years.
“We are looking at hiring at least 70 Indian cabin crew by February. We will also introduce a premium economy class on Indian routes starting October to tap small and medium enterprises,” Wright said. The premium economy class offers more leg space, personalized service and better food options.
Cathay Pacific’s cargo division is also planning to add more flights despite the slowdown, he said, without giving details.
Wright said all foreign airlines are keen to expand in India, adding that he hoped better “sense prevails” on the proposed tariff hike by the Delhi airport.
Starting 1 April, passengers and airlines using the Delhi airport will have to pay higher charges to fund the development cost of the Indira Gandhi International Airport.
Sidharath Kapur, chief financial officer at DIAL, said there has been only one increase in tariff in the past 10 years (a 10% increase in 2009). He said both airlines and airports should make money, and for that, the government should revisit the financial model of India’s airports.
pr.sanjai@livemint.com