Given operational risks, increase user development fees: Pvt airports

Major airports in India, particularly those with a substantial exposure to international traffic, are facing revenue losses, cost escalation and operational risk, Association of Private Airport Operators (APAO) told the Ministry of Civil Aviation (MoCA) on Thursday.

 

While the association -- in its letter to the MoCA -- supported the ministry's move on April 8 to reduce aircraft landing and parking charges by 25 per cent for domestic flights for three months, it asked the MoCA to increase the user development fee (UDF) for international passengers so that airport operators' losses can be compensated.

 

These aeronautical charges -- landing and parking charges as well as the UDF -- are collected by airport operators. The first two are collected from airlines while the third is collected from passengers.

 

The government reduced landing and parking charges on April 8 to give relief to airlines that have been hit by rising fuel prices since the West Asia conflict began on February 28.

 

APAO, in its letter on Thursday, also sought deferment of revenue share and per passenger fee payable by private airport operators to the government-run Airports Authority of India (AAI) for this relief period without interest or penalties.

 

It asked for upward revision of landing and parking charges after the relief period with "full true-up" in the next tariff cycle. Full true-up means the revenue shortfall will be adjusted and recovered later, when airport charges are reset in the next regulatory period. It also sought directions to ensure that such deferment is not treated as default under concession agreements.

 

APAO flagged that non-aeronautical income streams such as retail, parking, and other commercial activities are facing permanent losses in some cases, and unlike aeronautical charges, these cannot be recovered later through tariff true-ups.

 

It also pointed out that concessionaires (retail outlet operators, ground handling companies, etc.) operating within airport premises are seeking waivers due to loss of business arising from prevailing geopolitical disruptions. This, it said, is compounding financial stress for airport operators, who are already dealing with falling aeronautical and non-aeronautical revenues.

 

APAO has underlined that airport operating costs remain largely fixed and cannot be reduced in proportion to revenue decline. Security obligations, regulatory compliance, infrastructure maintenance and service quality requirements must be maintained at full scale at all times. “There has been no commensurate reduction in airport operating expenditure,” the association said, adding that airports are required to continue meeting stringent safety and service standards regardless of traffic fluctuations.

 

In its communication, APAO said that the ministry reduced aircraft landing and parking charges without adequate consultation with airport operators, which could weaken long-standing regulatory predictability in the sector.

 

It noted that regulatory stability has been carefully built over nearly two decades by the ministry and the Airports Economic Regulatory Authority of India (AERA). AERA decides aeronautical tariffs such as aircraft landing and parking charges for a particular period, which is generally five years.

 

Such unpredictability could also impact ongoing privatisation plans of 11 AAI-run airports and new greenfield airport projects being awarded by state governments, the association said. It said consistency in tariff frameworks is essential to sustain investor confidence in long-gestation infrastructure assets.

 

APAO raised concerns over the uniform nature of the 25 per cent reduction in landing and parking charges. It said the measure does not account for variations in traffic mix across airports, particularly the proportion of international versus domestic passengers.

 

This creates uneven financial stress across airports and leads to revenue imbalance, it said. “A uniform 25 per cent reduction, without accounting for such variations, creates significant revenue imbalances across airports,” APAO said, adding that tariff design should follow principles of cost causation and equity.

 

Additionally, it urged state governments to reduce value-added tax on aviation turbine fuel to 5 per cent or lower, noting that fuel costs form a significantly larger component of airline expenses compared to airport charges.

 

The association also cautioned that there is no enforceable mechanism ensuring that airlines pass on the benefit of reduced airport charges to passengers. As a result, the intended benefit of lower fares may not reach consumers, while airport operators alone bear the financial burden.