Tuesday, May 09, 2017

AERA likely to hike tariffs for 17 airports

The Airport Economic Regulatory Authority (AERA) is going to revise the tariffs of 17 major airports and chances are that they would be increased. The new charges are likely to come into effect during the current fiscal and would help in shoring up the revenues of Airport Authority of India (AAI). AERA has recommended lower airport charges for Delhi International Airport (DIAL), but the matter is currently sub-judice with the latter challenging it.
Almost 30% of the total revenue of AAI comes from its revenue-sharing agreement with DIAL and Mumbai International Airport (MIAL). In DIAL, the AAI receives 45% of the total revenue while in MIAL it is at 38%. If charges get lowered eventually in these two airports, the revenue of AAI would also decline. However, if AERA increases the charges at other airports, on an overall basis AAI’s revenue would not get hurt.
Sources said while revising the charges, AERA would use the hybrid till model, which is currently used to compute revenues of DIAL and MIAL. Under hybrid till, while the total revenue from aeronautical services is taken into account, only 30% of revenue from non-aeronautical services is taken leaving the balance 70% with the airport operators. This leads to better returns for the airport operators and leads to better infrastructure development of the airports. Currently, the airport charges of these airports are calculated on single till model where both aeronautical and non-aeronautical revenues are put in one basket.
09/05/17 Malyaban Ghosh/Financial Express