Higher levies to make Mumbai airport costlier for airlines

Written by Shauvik Ghosh | New Delhi, Aug 27 | Updated: Aug 28 2008, 07:00am hrs
At a time high ATF prices are making a hole into airlines bottomlines, flying and landing at Mumbai international airport may become costlier for the players in the sector. The GVK consortium, which is developing Mumbai international airport, is likely to get civil aviation ministrys approval for hiking aeronautical charges by 10%.

However, the GMR-led consortium, developing the Indira Gandhi International Airport at New Delhi may not be allowed to do so as it has not been able to complete the mandated 20% of capital project works within the stipulated time period of two years. The developers of the Delhi and Mumbai airports have been lobbying with the ministry and other stakeholders so as to be allowed to hike the charges they levy on airlines for landing and parking among other charges. But the ministry has been holding them back the idea citing ongoing financial difficulties faced by the airlines.

Ministry sources confirmed that while GVKs plea is being considered favourably by the ministry as the grounds for their request seem more pliable, GMR may not get permission for a similar hike. The developer of the Delhi International Airport has not finished the mandated 20% of capital project works within the stipulated time period of two years, so no permission would be granted to them for the hike in aeronautical charges this time, the source said.

Aeronautical charges generally include landing and parking fees for aircraft, besides ground-handling levies and are decided by the state-run Airports Authority of India. But the airport developers have to remain within the parameters of the concession agreements signed with the government. The agreement is clear on the matter as it states that the charges can only be hiked after a certain quantum of the respective projects is completed. If the particular quantum of capital project works are not done in time then it is up to the ministry to allow a hike in charges. A spokesperson from the GMR group has said the concession agreement allows for as much as 40% hike in airport charges over a period.

According to back-of-the-envelope calculations, the average landing charge per domestic flight at Mumbai was Rs 12,300 last year (for international flights, the average figure was Rs 56,000). This translated into an average yield per embarked domestic passenger of Rs 117 for GVK last year, against Rs 387 it earned from every international passenger.

Even ground-handling charges at airports such as Hyderabad are under the airlines control since they are doing all their ground-handling for domestic passengers themselves, thus depriving the developer of its share in the pie. Besides aeronautical revenues, the developers are allowed to charge user development fees from passengers to bridge any revenue gap. But, again, only greenfield airports at Hyderabad and Bangalore have been allowed to charge this levy. The Delhi and Mumbai airports will only be allowed to charge UDF after they finish the first phase of development sometime in 2010.