Airlines showcase opposition to Bangalore airport’s tariff hike proposal. However, many private airports supported the idea.
Private airport operators and airlines have locked horns over the issue of the former’s demands to raise tariffs for funding their ongoing expansion projects.
Opposition from Airlines
Airlines, on their part, oppose any hike saying this would increase cost of flying and further impact air traffic.
This catch-22 situation has come to the fore yet again on Bangalore International Airport Ltd’s (BIAL) proposal to increase aeronautical tariffs and user development fees (UDF) starting this October till March 2026.
Precarious Financial Situation
Citing “precarious financial situation,” pandemic-hit BIAL has sought a steep phase-wise hike for its third control period (April 1, 2021-March 31, 2026) in UDF starting this October till March 2026.
- Domestic UDF is sought to be hiked in phases from current Rs 217 to first Rs 450, then Rs 550 and finally Rs 555.
- Similarly the hike proposed for international passengers is from the current Rs 839 to Rs 1,350, then Rs 1,650 and finally Rs 2,220.
Newly proposed rates
“The (proposed) rates are way too high than the present rate and will raise average ticket prices by a great extent. Further, in the present situation it is unlikely that international travel will resume to normalcy level shortly, which makes domestic travel more important for airlines in India. There’s a jump and in UDF will… discourage passenger travel,” Air India says in its response to comments sought by Airports Economic Regulatory Authority (AERA) to BIAL tariff proposal.
Federation of Indian Airlines
The Federation of Indian Airlines (FIA), that represents all major Indian carriers, has cited the precarious financial health of airlines due to low traffic during the pandemic.
- Indian Airlines continue to incur high operational costs on account of higher airport charges and taxes.
- And, this has aggravated the imbalance in the cash flow position.
- All with limited financial support from the government.
- Airlines are constrained to implement severe cost control measures to sustain its operations.
AERA
In the given circumstances, it is imperative that AERA does not take any steps, including by way of increase in aeronautical tariff, during the third control period.
This precipitates any further adverse financial impact on the airlines. FIA has said in its response to AERA.
Association of Private Airport Operators
The Association of Private Airport Operators (APAO), that represents the PPP-run airports, has presented their side to AERA in their comments on BIAL proposal.
“The fall in traffic and various lockdowns due to Covid have adversely impacted BIAL’s finances and expansion projects. Despite this, BIAL has extended support to different stakeholders,” it says.
Losses amidst covid-19
Recounting losses suffered by BIAL, which started operation in May 2008, in early years “on account of inadequate tariffs”, APAO says.
“This loss can only be recouped through the tariff mechanism for the subsequent period. Denial of this recouping mechanism is against principles of natural justice to BIAL.”
Government of Karnataka
The state government of Karnataka has disagreed with AERA’s traffic projection for Bangalore. Given the sharp traffic rise that BIAL was seeing in pre-Covid times, it started a Rs. 13,300 expansion plan to build infra like a new terminal (T2) and new south parallel runway.
Realistic, fair and consistent approach
The state has sought “realistic, fair and consistent approach” in determining BIAL tariff – ensuring adequate cash flows to the company to for completing the expansion project. Not only this but to also have viable operations of the airport for next five years.
- The Karnataka government has also asked AERA not to levy 1% penalty on BIAL for the delay in T2 caused by the pandemic.
Tough time battles
While agreeing that airport operators are also having a tough time, Air India has told AERA-
“Any increase in UDF to compensate decreasing revenue stream will affect both the airport operator as well as the airlines. We strongly feel any revision in tariffs by BIAL should be kept in abeyance till signs of recovery in the Indian aviation sector is observed.”
BIAL, on its part, has requested the authority to conduct a limited mid-term review of tariffs at the end of March 2023.
Information Source: The Times of India
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