India high cost environment for airlines; critical that AERA is empowered further: IATA official

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India continues to remain a high cost environment for airlines to operate in and it is critical to empower the Airports Economic Regulatory Authority (AERA) further to safeguard the interest of passengers, said Philip Goh, Regional Vice President for Asia Pacific of global airlines body IATA.

AERA decides what tariffs — such as base airport charges, landing charges, parking charges and passenger service fee — can major Indian airports charge an airline or a passenger for a particular period after considering the airports’ expenditure and revenue projections for that period.

Goh told PTI in a statement last week, “Over the past year, with the third control period tariff reviews for India’s major airports, AERA has demonstrated its effectiveness as an independent regulator.”

“At a time when the government is planning on a big thrust on monetisation of airport assets under its National Monetisation Pipeline, it is critical that AERA is empowered further to safeguard the consumer interest,” he added.

Since the beginning of the pandemic in February last year, AERA has rejected the demands of operators of major airports such as Delhi and Mumbai for a major increase in tariffs for third control period, which began on April 2019 and ends on March 2024.

For example, AERA had in December 2020 rejected the Delhi airport operator DIAL’s demand to increase base airport charges by 424 per cent.

Similarly, AERA had in February 2021 rejected Mumbai airport operator MIAL’s demand to impose an ad-hoc user development fee (UDF) of Rs 200 on domestic outbound passenger and Rs 500 on international outbound passenger.

If the demand for ad-hoc UDF at the Mumbai airport was permitted, it would be unfair and an additional burden to passengers who should instead be getting the benefit of “reduced tariff” as they have “already overpaid in the prior years”, the AERA order had said.

Last month, AERA had issued an order stating that the UDF at the Bengaluru airport will remain unchanged till March 2022 and will be increased every financial year from April 2022 to March 2025.

In reaction, Bengaluru airport operator BIAL had expressed its disappointment stating that the AERA order was likely to be “seriously inadequate to meet our cash flow requirements and will also pose a challenge when it comes to meeting our operational expenses”.

Last week, Goh told PTI that India “is and continues” to be a high cost environment for airlines to operate in.

That’s why the role of AERA as the independent airport economic regulator is critical, otherwise airports will be able to increase their charges unchallenged, and without the necessary justifications, transparency and oversight, he added.

“But airport charges are only a part of the problem contributing to the high cost environment in India. While we welcome the abolishment of the fuel throughput fee in 2020, the MOCA (Ministry of Civil Aviation) must follow-through on it and do away with the rent seeking approach evinced in India’s airport royalties,” Goh mentioned.

Similarly, India’s Aviation Security Fee (ASF) — which was introduced in July 2019 to replace the Passenger Service Fee (Security Component) — has been increased for international passengers by 370 per cent and domestic passengers by 54 per cent in a short span of over two years, without much transparency and consultation, he noted.

The increases in ASF were decided and announced by the MOCA.

Airlines are gradually emerging from the deepest crisis to hit the aviation industry, he said.

“They should not be dragged down further with unreasonable cost burdens that would weigh on their recovery,” he added.

IATA’s Director General Willie Walsh had on October 3 in Boston, the US, harshly criticised the airports’ demands to increase their tariffs when the entire global aviation sector has been incurring massive financial losses due to the COVID-19 pandemic.

“Reducing costs-not increasing charges-must be at the top of everyone’s agenda. But total confirmed airport and ANSP (air navigation service provider) charges increases announced in 2021 have already reached USD 2.3 billion. It’s outrageous. And, if unchecked, it will get worse. That’s why I am ringing the alarm. This must stop,” he had said.

Everyone wanted to put COVID-19 behind them but placing the financial burden of a crises of apocalyptic proportions on the back of airlines — just because you can — is a commercial strategy that only a monopoly supplier could dream up, he had said in his speech at an IATA event.

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