The Delhi International Airport (DIAL) is likely to approach the Airports Economic Regulatory Authority (AERA)?s appellate tribunal after it found the recent airport charges hike ?inadequate?.
Industry sources said one of the main issues that the private airport developer would take up with the tribunal is the quasi equity based return on refundable security deposits (RSD).
The company had asked airport regulator to grant a ?return? on the deposits worth over R1,400 crore raised through leasing out around 45 acre of land allocated by the government for commercial utilisation. DIAL has been saying that it should be compensated for the loss of opportunity cost because the money was invested in the airport project.
Opportunity cost refers to the ?return foregone by investing in a project rather than in securities?. AERA, however, in its order on Wednesday, has ruled out any such return.
The GMR-led company had also sought a 24% return on equity (RoE), however, AERA has allowed only 16% RoE. ?These factors have contributed to the approved revision in aeronautical tariff not being in line with the expectation,? the company said in a statement after the AERA order was issued.
When contacted about moving the AERA Appellate Tribunal, the airport operator said, “We are still studying the document and we will decide on further action in due course of time.”
DIAL is expected to make a revenue loss of Rs 950 crore this year. The 345% increase in the airport charges is likely to take care of the situation to a large extent. The company, however, refused to comment on the issue. “We cannot make any forward looking statement on profitability. Nevertheless, this increase will be a significant step in stemming the losses of DIAL and taking DIAL towards viability,” it said in an emailed response.
The increase in airport charges has raised a tiff between the airport and airlines. While, the airline are complaining that a 345% hike in the airport charges would make DIAL as one of the most expensive airports in the world, the airport developer denies it.
“The increase approved by AERA is extremely disappointing. This will make Delhi the world’s most expensive airport. It will also have a larger impact on India and its economy, with an expected 5-8% decrease in demand at Delhi as a result of higher costs,” Albert Tjoeng, assistant director (corporate communications), at the International Air Transport Association said.
The airport developer do not agree with that. “We also do not agree with the comment that IGIA would become the most expensive airport. The calculations done to prove this are based on a particular segment i.e. international long Haul ( over 5000 km). This in our view showcases a biased view and does not represent the overall yield of an airport,” the company said.