The Air France-KLM combine sees India as a market offering great potential. But like several other global airlines, the combine feels that Delhi airport’s move to hike charges could be a dampener. In conversation with the Business Line , Yeshwant Pawar, General Manager, South Asia, AF-KLM, explains why.
What plans does Air France have in India after the recent hike in charges by Delhi airport?
Ours is also like any other business, so when you have an unprecedented hike in charges of 346 per cent, like that in Delhi, it clearly impacts our bottom line, our costs. In Delhi, the hike is a done thing, even though there is an appeal launched by a number of airlines, including Air France- KLM.
My perspective is that as an airline you use an airport so you expect to pay usage fee. But why should you pay towards the development and infrastructure that an airport has chosen to build around itself? Why should an airline contribute to that?
Besides, we have examples right now where Inchon airport in Korea has just offered us a decrease — please note, a decrease. They have temporarily frozen landing charges for three years; they will not increase them at all. Then there is also temporary elimination of lighting charges and 50 per cent reduction of boarding bridge charges for those who operate at concourses.
In contrast, Delhi and Mumbai are being promoted as hubs. How are you going to attract airlines and therefore traffic to transit these cities if the charges are going to be so high? I think it works against the interests and aspirations that the Indian civil aviation authority has. On top of that because the aviation business is, by and large, low margin, these costs have to be put somewhere. I know that a number of airlines, including Air France-KLM, have increased fares.
Was the increase in fares seasonal or due to other reasons?
It was a structural increase, which had nothing to do with season.
What is the minimum and maximum increase in fares that a passenger has to pay as a result of 346 per cent increase in charges at Delhi?
Between 10-16 per cent or an average of Rs 5,000 to Rs 7,000 on a round trip to Europe. The snowball effect has been that Chennai airport has come into the fray, Mumbai is even talking of a 600 per cent hike.
How does this impact an airline?
Aircraft are our resources and these are limited resources. As an airline we want to put these resources where we get the best margins. In that context, India is a very strategic country for Air France and KLM. There should be absolutely no doubt about our intentions to continue to invest in India and to continue to grow.
Invest in what sense?
If you are flying to a country where you may be making marginal profits and your costs are going up that means that you might make losses, but still you continue to fly. In my opinion that is still an investment. In future, looking at how India is developing or is expected to develop, it is possible that we will look at an increase in flights. But that is not a guarantee.
However, if there is a demand, why will we not look at increasing flights? It has got to be good for business, but the hike by Delhi airport is to the contrary because it is not good for business and that means that if charges in Mumbai goes up tomorrow and Chennai does that too, you will start looking at the cost revenue equation and that is going to deteriorate and that is not good for business.
It will not be good for us or for any other airline company, and that is why you see the appeal that has been launched.
So, the main issue is that if you are competing to be a hub, do not forget that you have Dubai and Singapore as competitors. So, you need to have a hub where it is convenient for people to transfer at an acceptable cost. This cost is not acceptable.
Could the Air France-KLM combine look to operate to another country as cost of operations in India is high?
At the moment not. We have no intention to either discontinue or decrease capacity as a direct result of these increases. India is a strategic market and we want to continue investing but what we are saying is do not make it difficult.
Airlines complain about the high charges but except for Air Asia and American, no other airline has pulled out of Delhi due to the hike in charges. How do you explain this?
Well, there is an appeal, so we are hoping to see if we get anything back. We hope the Government will see light at the end of tunnel, make it an attractive destination for airlines to continue investing here.
Let us not forget the consumer, the Indian traveller. If airlines continue pushing these costs on to the customers, what is going to happen is that the natural dynamics will kick in and demand will drop. Then people will buy and travel less. It’s not good for any one, be it Delhi Airport or Mumbai Airport or the authorities.
The core issue is that airlines pay for the usage of the terminal and they should not be burdened with the infrastructure cost of developing the airport.