Concerned with the ‘wording’ regarding the airport revenue generation in the new aviation policy, global airline association IATA has raised objection and approached the government for clarification.
While the draft National Civil Aviation Policy indicates that tariff at ‘all future airports’ will be calculated on a hybrid-till basis, the final policy states ‘future tariffs at all airports’ will be calculated on a hybrid-till basis.
This, experts claim, will impact the basis for tariff determination for private airports in India. Passenger charges in India will increase, making air travel more expensive.
“This change will impact the basis for tariff determination for private airports in India, and also signal AAI (Airports Authority of India) to switch from the single-till approach used currently to the hybrid-till. This makes Aera (Airports Economic Regulatory Authority of India) a toothless entity. Passenger charges in India will increase, making air travel more expensive and it contradicts one of the stated intentions of the NCAP to make flying affordable,” said Conrad Clifford, regional vice president, Asia Pacific, IATA.
Aera is a regulatory body for deciding on airport revenues.
The clause 14 E of the draft NCAP released in October 2015 highlighted that at all the future airports will be calculated on a hybrid-till basis wherein 30% of non-aeronautical revenue will be used to cross-subsidise aeronautical charges.
The aviation industry follows three different models when it comes to airport revenue viz: single till, double till, and hybrid till. In the single-till model, both aeronautical (aircraft charges) and non-aeronautical (charges from restaurants, shops, etc, inside the airport) charges are taken into account to calculate the airport charges. In the double-till model, aeronautical charges are calculated on the basis of revenues from aeronautical and non-aeronautical charges on the basis of collections from non-aeronautical. However, the hybrid till model mandates that the charges be calculated by taking all the aeronautical and 30% non-aeronautical revenue.
Ironically, clause 12 C of the final NCAP reads that the future tariffs at all airports will be calculated on a hybrid-till basis, unless otherwise specified for any project being bid out in future.
According to IATA (International Air Transport Association), which has over 260 airlines from across the globe as its members, the NCAP has reduced economic regulation in India to a single bullet point by mandating hybrid till as the basis for tariff determination, while being silent on other critical aspects of economic regulation such as the rate of return, regulatory asset base, separation of airport assets and costs, etc.
It ignores the conclusions reached by Aera and the Ministry of Finance after an extensive evaluation that the single till is the most appropriate approach for India, with no explanation given for upturning Aera’s earlier order.
Airports under private-public partnership like Mumbai and Delhi follow the hybrid model. The Aera had earlier insisted that single-till model is the best in country like India as it reduces the burden on the passengers.