The GMR-led consortium, which manages the Delhi airport, can now breathe easy. After waiting for long and threatening that unless there was an increase in charges, its entire net worth could be eroded, the airport has been finally given the green signal to increase charges by over 345 per cent by the Airports Economic Regulatory Authority (AERA). The increased charges come to effect from May 15.
While the proposed increase is less than the 800 per cent hike wanted by the Delhi International Airport Ltd (DIAL), many feel that it needs to be seen whether the increase is justified.
Reasons for increase
DIAL has been saying that one of the reasons for the increase is they have to pay 46 per cent of their revenues to the Airports Authority of India. But here it must be stated that 46 per cent revenue share was the revised bid put in the GMR group-led consortium to outbid Reliance.
DIAL has declared a loss of Rs 229 crore in Q3 this fiscal, saying huge investment on upgrading a deficient infrastructure, whopping rise in traffic and operational costs are prompting it to pitch for a hike in airport tariff.
The President, IndiGo Airlines, Mr Aditya Ghosh, pointed out that other elements which formed the basis of the increase, included the escalated project cost of Rs 12,857 crore from the initial estimated Rs 8,975 crore. He added that this had been challenged by the Federation of Indian Airlines in an appeal to the regulator.
Pointing out that the increase was “extremely disappointing” an International Air Transport Association spokesman said India's aviation industry is already sick. “This increase in Delhi's charges will put it in intensive care from a cost perspective,” he added.
Among the various reasons why the project cost escalated include the airport operator's decision to undertake some constructions which were not part of the original project plan, say analysts. This includes constructing terminal 1D which is said to have cost around Rs 500 crore.
In its defence, DIAL officials have often pointed out that airport charges have not been revised for the last 10 years, except for a 10 per cent hike in 2010.
May rethink
Analysts point out that the increase in charges will make Delhi airport too expensive for many airlines, who may rethink their India operations.
In this context, airline officials point to the decision of American Airlines to withdraw from Delhi primarily because of the high airport charges. Similarly, the Malaysian low- cost carrier Air Asia X pulled out of Delhi citing high cost of operations.