New Delhi: A global airlines’ association on Tuesday raised concerns over a provision in the recently approved national civil aviation policy (NCAP) to ascertain airport tariffs.
According to International Air Transport Association (IATA), the approved policy states that “future tariffs at all airports will be calculated on a hybrid-till basis” — which can make air travel more expensive.
“While the draft NCAP indicated that ‘tariff at all future airports will be calculated on a hybrid-till basis’, the final policy states ‘future tariffs at all airports will be calculated on a hybrid-till basis’,” said Conrad Clifford, Regional Vice President, Asia Pacific, IATA.
The “hybrid-till” model is used to ascertain aeronautical charges at airports. The model permits airport operator to include a portion of its income generated through non-aeronautical side of activities with those of aeronautical ones to calculate the total earnings.
The operator generates revenue by charging aeronautical activities such parking, housing and landing (PHL). It also earns revenue from non-aeronautical streams like duty free shops, food and beverages (F&B) outlets, vehicle parking and advertisements.
Based on the total earnings from the “hybrid-till” model, aeronautical rates are then decided by Airports Economic Regulatory Authority (AERA).
However, under a “single-till” model, earnings garnered through aeronautical and non-aeronautical activities are added together to form the total income. This model is considered to be more cost effective for airlines, as airport charges constitute around 14 per cent of the total operational cost of a passenger carrier.
Clifford said that the change will not just impact the basis for tariff determination for private airports, but also signal AAI (Airports Authority of India) to switch from the “single-till” approach to “hybrid-till”.
“This makes AERA a toothless entity. Passenger charges in India will increase, making air travel more expensive. And it contradicts one of the stated intentions of the NCAP to make flying affordable,” Clifford pointed out.
The global airlines’ association said that it will approach the Ministry of Civil Aviation to clarify the “seemingly minor change in the wording”, which could have a major impact on airport charges in India.
“The NCAP has reduced economic regulation in India to a single bullet point by mandating hybrid-till as the basis for tariff determination, while being silent on other critical aspects of economic regulation such as the rate of return, regulatory asset base, separation of airport assets and costs, etc,” Clifford added.
He said, “It ignores the conclusions reached by AERA and the Ministry of Finance after an extensive evaluation that the single-till is the most appropriate approach for India, with no explanation given for upturning AERA’s earlier order.”