Competition next door, Delhi airport planning salary hike, bonus for staff

Delhi International Airport Limited (DIAL), which runs India’s busiest airport, is planning salary hikes and bonuses to retain its workforce as it braces for fierce competition from Noida airport’s operator, Yamuna International Airport Private Limited (YIAPL). DIAL admitted that these pay raises will have a "considerable" impact on its total manpower costs.

 

GMR Group-led DIAL has urged the Airports Economic Regulatory Authority (AERA) to approve higher aeronautical tariffs from airlines and passengers, citing financial pressures from the Noida airport, which is coming up about 70 km away. Beyond rising employee costs, it expects a surge in advertising expenses and a potential squeeze on cargo and air traffic revenues as competition hots up.

 

YIAPL, a subsidiary of Zurich Airport International, is currently constructing Noida Airport in Jewar, Uttar Pradesh. 

The airport was initially scheduled to begin commercial flight operations in September last year. However, its deadline has been postponed twice. It is now expected to start operations later this year. 

In its recent proposal to AERA, DIAL stated that it expects manpower costs to rise by about 12 per cent — 4.6 per cent due to inflation and around seven per cent owing to real growth in manpower costs — between 2024-25 and 2028-29. 

It also projected a 21 per cent increase in employees in 2024-25 and another four per cent in 2027-28 for expansion. 

However, AERA has disagreed with DIAL’s numbers. After its assessment, it concluded that salary and wage growth would average around six per cent. DIAL countered, calling this assumption “detrimental” to its operations. 

“We have already highlighted that the second airport (Jewar), within the vicinity of Delhi airport, is due for operation in 2025-26. DIAL will see a considerable impact on manpower costs to retain employees,” it noted. 

DIAL stressed the need to retain “employees specialised in operations” and argued that additional cash flows would be required for increments, retention bonuses, and other payments. 

DIAL requested AERA to align manpower cost projections with its submissions and consider at least a nine per cent growth, as observed by AERA itself in previous “control periods.” 

AERA sets airport tariffs by assessing projected costs within fixed time blocks called control periods, typically lasting five years.

These tariffs cover aeronautical charges such as landing, parking, and passenger fees, directly affecting airport revenue, and airline costs as well as ticket prices. 

Currently, AERA is determining the aeronautical tariffs for Delhi airport's fourth control period, spanning 2024-25 to 2028-29.

Business Standard has reviewed documents related to the matter. DIAL and YIAPL did not respond to the newspaper's queries regarding the issue. 

Besides employee expenses, DIAL also anticipates a rise in professional and consultancy expenses due to increasing passenger capacity, operation of four runways, and impending “competition from Jewar airport.” 

It projected these costs will grow annually by 4.6 per cent due to inflation and 10 per cent due to real growth throughout the fourth control period. 

However, after analysing past growth trends, AERA found significant inconsistencies, with some years showing negative growth. Based on this, it proposed considering only the inflation rate of 4.6 per cent per year. 

The airport operator, in its submission earlier this month, stated that while this submission has not been accepted, it is “required and necessary” for DIAL to “remain competitive.” 

In its assessment, AERA observed that DIAL's projected growth in earnings per tonne of cargo for the fourth control period is much lower than the average growth seen in the last five years. 

However, it admitted that past growth was unusually high and may be hard to maintain, especially with Noida's upcoming international airport, which is planned as a cargo hub. 

Given this, AERA stated that it expected a 10 per cent annual growth rate for DIAL’s cargo earnings. 

In its submission earlier this month, DIAL stated that it expected “stiff competition” from Jewar Airport in attracting cargo business, and this could drive down cargo-related revenues. 

“Delhi airport will face stiff competition from Jewar in terms of cargo. Thus, to remain highly competitive, the cargo entities are projected to offer highly competitive pricing to sustain the existing cargo volumes,” it added. 

Unhappy with AERA's growth rate assumption, DIAL requested the AERA to reconsider the growth factors for cargo revenue and apply an inflationary increase of 4.9 per cent per annum instead of 10 per cent.