Hybrid till model to boost AAI's revenues

The civil aviation ministry's decision to adopt a hybrid till model will boost the revenues of the Airports Authority of India (AAI), which clocked record earnings in 2015-16.

The AAI till now used to set airport charges on a single till model, for which the total revenue and expenditure of all AAI airports were taken into consideration and the tariff for the gap was arrived at on a reasonable rate of return.

The hybrid till model is a combination of the single till model, under which all airport activities, including aeronautical and commercial, are taken into consideration while determining airport charges, and the dual till model, under which only aeronautical activities are taken into consideration to set airport charges. The new model will be used to set charges from the second control period, which started from April 2016.

The civil aviation policy states that future tariff at all airports will be calculated on a hybrid till model. It adds 30 per cent of all non-aeronautical revenues will be used to cross-subsidise aeronautical charges.

"Definitely, it will increase revenue for the organisation," said an AAI official.

He added the AAI would have to forgo charges on all airports under the regional connectivity scheme and the hybrid till model would help it to take up development initiatives.

The AAI will undertake initiatives to boost non-aeronautical revenue in all major airports in the country. "Airports like Chennai, Kolkata and Ahmedabad have the potential to attract franchisees. The AAI is also undertaking city-side development in various airports," the official said.

The AAI had earlier changed its policy to increase the tender period for duty-free shops to seven years from three years because of the lack of interest from large companies.

The AAI's total revenue was Rs 10,825 crore in 2015-16, a 17 per cent jump from Rs 9,285 crore in 2014-15. Non-aeronautical revenue rose 23 per cent to Rs 1,203 crore in 2015-16 from Rs 981 crore in the previous year.

Setting tariffs through the hybrid till model will, however, lead to an increase in airport charges. "Passenger charges will increase, making air travel more expensive. This contradicts one of the stated intentions of the policy, to make flying affordable," said Conrad Clifford, regional vice-president of the International Air Transport Association.