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Air fares at IGI may drop on AERA push for 78% cut in airport charges

In what could lead to a drop in fares on flights going in and out of New Delhi, the government’s airports tariff regulator has proposed over 78% lower airport charges at the GMR-operated Indira Gandhi International (IGI) Airport for a five-year period starting March, 2014.

While airlines will benefit in terms of lower landing and parking fees, air passengers can save as much as Rs 800 on a return flight on the busiest domestic sector – Delhi-Mumbai. Currently, the IGI airport charges user development fee (UDF) for departing passengers at Rs 275.3 (short haul) to Rs 550.61 (long haul), and arriving passengers at Rs 233 to Rs 466. A Delhi-Mumbai return passenger thus pays Rs 1,017 as UDF to Delhi airport, but only Rs 274 for Mumbai (departing passengers).

A consultation paper published on the Airports Economic Regulatory Authority (AERA) website dated January 28, 2015 has floated a proposal for 78% reduction in aggregate revenue requirement (ARR) for Delhi International Airport Ltd (DIAL) in the second control period. ARR is potential charges levied by DIAL to flyers, while control period refers to a five-year period. The first control period on which AERA permitted charges was between April 2009 to March 2014.

“The Authority proposes to consider the X factor in respect of the aeronautical tariffs for the second control period for the IGI Airport, Delhi at (+78.24%) based on the authority’s computation provided that the revised tariff is made effective from February 1, 2015,” AERA’s 350-page consultation paper said.

The paper added that stakeholders have to reply by February 27. The implementation of the proposal will be done once DIAL, a joint venture between GMR (74%) and state-owned Airports Authority of India (26%), submits fresh rate slabs for its approval. The tariffs for Delhi Airport were last revised in 2012 when AERA allowed DIAL to hike charges by 346 per cent as against 775 per cent sought by the private operator.

Responding to queries, a DIAL spokesperson said, “AERA’s final determination of the aeronautical tariffs for the second control period will only be issued on completion of the consultative process amongst stakeholders. The Company intends to submit a response to the consultation paper in support of the Company’s previously-submitted tariff proposal.”

It added, “In the public notice, AERA acknowledges the Delhi High Court’s order, dated January 22, 2015, whereby the High Court directed that the current aeronautical tariffs from the first control period remain in effect until the final adjudication of the Company’s appeals against AERA’s tariff determination for the first control period. More importantly, AERA states in the public notice dated January 29, 2015, that its tariff order dated April 24, 2012 is extended (in-line with Delhi High Court order).”

Till date, Bengaluru-based GMR Group has invested more than Rs 12,500 crore in the Delhi airport.

Airlines and the travel industry welcomed the development. Conrad Clifford, Regional Vice President, Asia Pacific, IATA said, “This is a positive development. AERA’s proposal of an X-factor of +78% will translate into reduced charges at Delhi Airport. This will be a welcome relief for airport users who have been impacted by the over 340% increase in airport charges since 2012.

We are still waiting for the tariffs for the 2nd control period, which should have been determined 10 months ago. It is important that the reduced charges be implemented promptly so that airlines and passengers using Delhi airport will not be paying more than they should in fees and charges.”


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