In a move that could improve the profitability of carriers offering flights between India and Singapore, the Changi Airport Group is set to reduce the operational charges for airlines. Though the move has been welcomed by carriers, passengers may not see an immediate reduction in fares, according to analysts.
Currently, Jet Airways, Singapore Airlines, SilkAir, Indigo, TigerAir and Air India offer direct flights between various Indian cities and Singapore’s Changi Airport, which is managed by the Changi Airport Group.
A recent directive from the airport says that all airlines operating from Changi Airport are to get an ‘across-the-board reduction’ in operating charges.
From July 1, airlines have to pay 50 per cent less on aircraft parking fees, and 15 per cent less on aerobridge charges for the next 12 months. In addition, the airport operator would introduce a new package of incentives, which would reward airlines for growing transfer traffic at the Changi Airport.
The move assumes significance given the current state of affairs in the Indian aviation sector. Last year, the industry had witnessed combined losses of over Rs 7,600 crore, with some of the leading players ending in the red. With oil prices soaring again due to the Iraq crisis, airlines are looking at newer ways of reigning in the costs.
Rebates, incentives
“Changi Airport rebates and incentives are aimed at attracting new airlines and reducing costs for the current operators. The airport operator is always ahead in understanding the needs of the market and responds decisively, as and when required. Airlines will treat this positively,” Kapil Kaul, CEO, South Asia, at research and advisory firm Centre for Asia Pacific Aviation (CAPA), said.
Welcoming the move, a spokesperson for Singapore Airlines said: "It is important that Changi retains its competitive position as a major hub in the region, and we would hope that the incentives can be extended beyond 2015."
Drop in airfares
However, there is no unanimity among carriers about the reduction in charges resulting in a drop in airfares. Airline and parking charges account for less than 10 per cent of an airline’s operating expenses.
A spokesperson for Singapore-based TigerAir, which operates flights between Hyderabad-Singapore through an interline arrangement with Spicejet said: “We are unable to comment on the quantum of the reduction in ticket price from Hyderabad to Singapore, as ticket prices are usually determined by demand and supply dynamics in the market.
A senior official with a leading Indian airline said that Changi would have to take a long-term perspective on such initiatives for airlines to consistently increase the profit on India-Singapore route, and pass on those benefits to the flying public.
A spokesperson for Jet Airways said that the carrier has not received an official communication from Changi on the new schemes, and that it would "evaluate the impact accordingly''.