As Indian airports raise fees, others choose to cut them

As Indian airports raise fees, others choose to cut them
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First Published: Thu, Feb 12 2009. 01 59 AM IST

User-friendly: A China Airlines plane at Taiwan Taoyuan International Airport. China has temporarily suspended a landing fee surcharge. Maurice Tsai / Bloomberg
User-friendly: A China Airlines plane at Taiwan Taoyuan International Airport. China has temporarily suspended a landing fee surcharge. Maurice Tsai / Bloomberg
Updated: Thu, Feb 12 2009. 01 59 AM IST
Mumbai: As Indian airports run by private operators mark up charges to recover investments, many airports across the world, particularly Asia, have either reduced or frozen fees and levies in the face of a global economic downturn that has hit the aviation industry hard.
For instance, Civil Aviation Authority of Singapore, or Caas, that runs Singapore’s international airport has offered a 25% landing fee rebate. The Civil Aviation Administration of China, or Caac, has suspended for six months starting 1 January a 10% landing fee surcharge at Chinese airports.
User-friendly: A China Airlines plane at Taiwan Taoyuan International Airport. China has temporarily suspended a landing fee surcharge. Maurice Tsai / Bloomberg
In India, the story is different, although passenger traffic growth has declined in a slowing economy and airlines in the country are forecast to end the fiscal year with combined losses equivalent to $2 billion (Rs9,760 crore).
On 9 February, the government approved the levy of an airport development fee (ADF) by Delhi International Airport Ltd, or DIAL, which runs the Indira Gandhi International Airport in New Delhi, at Rs1,300 per departing international passenger and Rs200 per departing domestic passenger.
The levy, which takes effect from 1 March, will be in force for a period of three years to help the GMR Group-led consortium that runs the airport raise Rs1,827 crore to cover the costs of modernizing the airport.
Mumbai International Airport Ltd, or Mial, which runs the Chhatrapati Shivaji International Airport in Mumbai, has also requested the government for permission to levy a similar charge. It has already increased airport charges by 10% from 1 January 2009—a hike DIAL wants to emulate.
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Bengaluru International Airport is charging an extra fee from passengers in the name of a user development fee, or UDF, at Rs260 per domestic passenger and Rs1,070 per international passenger. At Hyderabad the same fee is Rs375 and Rs1,000, respectively.
“The airline industry (globally) is facing the worst revenue environment in 50 years. Passenger and cargo traffic is expected to decline by 3% and 5%, respectively, this year. Industry losses were $5 billion in 2008, and projected to be $2.5 billion in 2009,” said Albert Tjoeng, corporate communications manager (Asia Pacific) at the International Air Transport Association, or Iata, that represents some 230 airlines accounting for 93% of scheduled international air traffic.
He said many airport operators across the world had taken a long-term perspective in their relationship with their airlines, and responded to the economic crisis by either slashing or freezing charges at airports.
“But Indian airports have totally missed the plot... The new charges at Mumbai and Delhi are meant to increase revenue for the airport to fund airport development. But passing the financial burden to airlines is not the way to go. Increasing costs in the current economic environment could potentially have a negative effect on India’s tourism and business traffic,” Tjoeng said.
There is already an estimated 20% over-collection of air navigation charges and 33% differential in charges for overseas operations in India compared with other international airports, according to Iata.
Federation of Indian Airlines or FIA, a lobbying body, in mid-January requested the government for a temporary 50% relief from airport charges, saying the current rates are excessive compared with those in neighbouring countries. It argued against any increases in rates and introduction of new charges at airports such as UDF, common infrastructure fee and increase in rentals.
FIA and Hyderabad’s new airport are still sorting out the issue of new charges laid out by the airport on usage of aero bridges and advance self-check-in system.
“You require funds for the airport development. It is a positive step that government gave its go-ahead for the ADF at Delhi airport. We do not wish to comment on these issues further,” said a senior executive at GMR Group, which also controls the airport at Hyderbad. The executive didn’t want to be identified.
A senior Mial executive, who, too, didn’t want to be named, said airport charges in India haven’t been raised for 10-15 years, adding that airports required to makehuge investments in modernization. “At the end of the day, somebody will have to pay for it. Nothing comes free,” he said.
Airlines say they can’t afford to pay more. “We cannot take any more financial burden as the passenger growth is declining day by day. At this point of time, we are against any new charges imposed by airports,” said a senior executive with a private airline, who did not want to be identified.
“The airports should instead find ways to work with airlines to grow the traffic, be it through joint promotions or marketing campaigns. And also look at growing the proportion of its revenue it gets from non-aeronautical sources,” Tjoeng of Iata said.
He added that India has to take a long-term perspective on aviation infrastructure investments rather than focus on a quick, short-term recovery of costs.
The country needs to establish an Airport Economic Regulatory Authority to ensure that aviation infrastructure meets cost-efficiency and service-level targets, he said.
Graphics by Sandeep Bhatnagar / Mint
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First Published: Thu, Feb 12 2009. 01 59 AM IST