New Delhi: Has the privatisation of Delhi and Mumbai airports helped improve airport infrastructure in the country or has it encouraged private operators to skim profits while raising costs for flyers ? There have been voices supporting these opposing points of view, depending on who is making the argument. But now, the Government finds itself in a pickle.
The airport regulator AERA wants to reduce aeronautical charges (levies airlines pay for landing, parking etc) at Delhi airport by a steep 78%. If the Government allows AERA to do this, it is working against itself since it remains a stakeholder in the airport project. But If the Government allows the regulator to maintain aeronautical charges, there could be allegations of hurting airlines' bottomlines.
State run Airports Authority of India (AAI) holds 26% equity in Delhi International Airport Ltd (DIAL) while it earns 46% revenue share from the airport. GMR, Fraport and Malaysia Airport Holdings are the other three stake holders with 54%, 10% and 10% stake respectively. AERA's push for reduced aeronautical charges at Delhi will be a boon for airlines but will shave off Rs 900 crore straightaway from AAI's topline. Revenues earned from Delhi airport account for almost a third of the total revenues AAI earns from all airports across the country, so a steep reduction in charges airlines will pay at Delhi has a huge impact on AAI's topline. Any such reduction will also obviously impact its bottomline.
AAI earned close to Rs 8300 crore total revenues last fiscal of which close to Rs 2500 crore came from Delhi airport alone.
A senior AAI official told Firstpost hat the authority wants the Ministry of Civil Aviation to solve this issue and has written to the ministry. "We have said in a letter to the ministry that AERA has not consistently followed the formula of ARR which means Aggregate Revenue Requirement in the second control period versus the first.....we are opposed to the reduction in aeronautical charges at Delhi".
AAI is only supporting what GMR has been saying all along - that such a steep reduction in charges will turn the airport project unviable. In January this year, AERA had pushed for reduction in airport charges by 78 per cent during five years ending March 31, 2019 (the second control period).
AERA had asked various stakeholders to submit their comments on the proposed reduction by April 10. It is interesting to see that in 2012, the same AERA had allowed DIAL to increase airport charges by a steep 346 per cent though DIAL had at the sought an increase of 775 per cent. So AERA's present insistence on reducing the charges now is rather baffling.
But like we said earlier, DIAL and its workings have been the subject of a debate with opposing points of view. So while AAI and GMR have been saying that slashing aeronautical charges will harm the airport project and make it unviable, here's another fact: GMR has recently agreed to buy out Malaysia Airport's entire 10 per cent stake in DIAL for close to Rs 490 crore. If the airport project was really unviable or becoming unviable anytime soon, would GMR be keen to put in this amount or raise its stake?
The total project cost of DIAL is about Rs 13,500 crore. Of this, AAI has invested Rs 1100 crore as equity, GMR brought in Rs 2500 crore. Another Rs 7500 crore has been raised as debt while remaining Rs 3500 crore has been raised through a development fee levied by the airport operator on passengers flying out from the airport.
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Updated Date: Apr 14, 2015 14:57:53 IST