1. AERA likely to hike tariffs for 17 airports

AERA likely to hike tariffs for 17 airports

The Airport Economic Regulatory Authority (AERA) is going to revise the tariffs of 17 major airports and chances are that they would be increased.

By: | New Delhi | Updated: May 9, 2017 7:44 AM
Almost 30% of the total revenue of AAI comes from its revenue-sharing agreement with DIAL and Mumbai International Airport (MIAL). (IE)

The Airport Economic Regulatory Authority (AERA) is going to revise the tariffs of 17 major airports and chances are that they would be increased. The new charges are likely to come into effect during the current fiscal and would help in shoring up the revenues of Airport Authority of India (AAI). AERA has recommended lower airport charges for Delhi International Airport (DIAL), but the matter is currently sub-judice with the latter challenging it.

Almost 30% of the total revenue of AAI comes from its revenue-sharing agreement with DIAL and Mumbai International Airport (MIAL). In DIAL, the AAI receives 45% of the total revenue while in MIAL it is at 38%. If charges get lowered eventually in these two airports, the revenue of AAI would also decline. However, if AERA increases the charges at other airports, on an overall basis AAI’s revenue would not get hurt.

Sources said while revising the charges, AERA would use the hybrid till model, which is currently used to compute revenues of DIAL and MIAL. Under hybrid till, while the total revenue from aeronautical services is taken into account, only 30% of revenue from non-aeronautical services is taken leaving the balance 70% with the airport operators. This leads to better returns for the airport operators and leads to better infrastructure development of the airports. Currently, the airport charges of these airports are calculated on single till model where both aeronautical and non-aeronautical revenues are put in one basket.

In FY17, AAI increased its airport charges by10% in the non-major airports under its jurisdiction. “We have submitted our proposals in AERA and expect a hike in airport charges in 17 of our major airports. Our cargo operations is expected to do well in the coming years so we need not worry about the loss of revenue from private airports,” explained an official of AAI.  In FY16 AAI had reported a 16.57% y-o-y rise in its revenue at `10,824 crore while net profit increased by almost 30% to Rs 2,537 crore.

AAI has also appointed Boston Consultant Group to help exploit the commercial potential of terminal buildings and has also created a separate subsidiary for cargo operations last year and expects to double its revenues in the next two years.

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