Airport operators in India have formally reached out to the Ministry of Civil Aviation (MoCA) for immediate assistance after the government announced a 25 per cent reduction in landing and parking charges for domestic flights. This decision, issued on April 30, 2023, by the Airports Economic Regulatory Authority (AERA), is set to be effective for three months. The operators are urging MoCA for quick policy implementation to mitigate the negative implications of this cut.

In a letter directed to MoCA, the Airport Operators Association of India (APAO) has expressed its agreement with the intervention aimed at providing urgent relief to the civil aviation industry. However, the letter also noted a concern regarding the impact on the Aggregate Revenue Requirement (ARR) for operators, which suggests that any financial shortfalls would be addressed during a subsequent control period.

Operators have highlighted the uncertainties stemming from the current geopolitical climate and indicated that the recent changes will likely burden their cash flow, debt servicing abilities, and overall operational viability. Major airports, especially those reliant on international traffic, are facing challenges, including a decline in passenger numbers, reduced revenues, and heightened operational risks.

Concerns Over Revenue Losses and Operating Costs

Sources have indicated that airport operators are currently experiencing substantial losses, particularly in the non-aeronautical revenue streams, which have no prospect for recovery. The operators have asserted that the adverse financial effects are not solely confined to airlines, thereby signalling broader impacts on the overall aviation ecosystem.

Moreover, the operators have raised alarms about the regulatory landscape, stating that the sudden alteration of airport tariffs without prior consultation undermines the regulatory stability established in the aviation sector over the past 16 years by MoCA and AERA. This disruption occurs at a crucial juncture when the government is looking to privatise additional Airports Authority of India (AAI) airports.

It has been reported that AERA may not have fully taken into account the varying operational mixes across different airports, particularly regarding the proportions of domestic versus international traffic. The uniform reduction of 25 per cent is perceived as creating financial disparities and could be interpreted as arbitrary, prompting a call from operators for a more tailored, airport-specific approach to revenue adjustments.

Recommendations for Immediate Relief

In light of the challenges they are facing, airport operators have proposed several recommendations to MoCA to alleviate the financial strain. One suggestion includes deferring the payment of revenue share or per passenger fees to AAI for the duration of the relief period, with an assurance that no interest or penalties would apply.

Operators have further requested that AERA re-evaluate landing and parking charges upwards immediately after the relief period concludes, along with a true-up for any under-recoveries incurred during this time. They have also suggested compensating for the losses through increased User Development Fees (UDF) for international passengers, thereby preventing future financial discrepancies.

In addition, airport operators have emphasised the significance of ensuring that airlines transfer the benefits of reduced charges to passengers, although they acknowledge that airline pricing is generally unregulated and lacks an enforceable structure to ensure lower fares. Furthermore, operators have pointed out that Aviation Turbine Fuel (ATF) represents a significant portion of airline expenses and have recommended that MoCA engage with state governments to lower the Value Added Tax (VAT) on ATF to 5 per cent or below.

In conclusion, airport operators have reaffirmed their commitment to supporting government initiatives that protect the interests of domestic airlines while stressing the necessity for aircraft operations to remain financially resilient. They assert that the viability of airports, critical infrastructure financed predominantly by public sector banks, must be preserved to ensure essential service continuity.

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