New Delhi: With the new civil aviation policy proposing to extend the so-called hybrid till model for determining airport charges to state-run (Airport Authority of India-operated) airports also, passengers will have to fork out more as user development fees (UDF). Besides, they could also suffer from airlines deciding to treat their share of the extra cost as a pass-through to the passengers, analysts said.
This runs contrary to the new policy’s objective of making air travel more affordable.
Airport charges are universally determined under single till, double-till and hybrid-till mechanisms. In all cases, airport operator gets a predetermined internal rate of return (IRR) as per the concession agreement. Under single-till mechanism, revenues from both aeronautical (landing, parking and ground handling) and non-aeronautical (duty-free shops, hotels, restaurants and airport infrastructure) segments are taken into account to determine the IRR.
However, under the hybrid till method, which is currently being used by joint venture (public private partnership) airports, only 30% of non-aeronautical revenue is taken towards IRR, allowing the operator to pocket 70% of the non-aeronautical revenue. The idea is to encourage the operators to expand airport infrastructure. But the lower revenue base compared to single-till method practically prompts the operators to levy higher charges (UDF) on passengers and airlines.
04/07/16 Bilal Abdi/Financial Express
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This runs contrary to the new policy’s objective of making air travel more affordable.
Airport charges are universally determined under single till, double-till and hybrid-till mechanisms. In all cases, airport operator gets a predetermined internal rate of return (IRR) as per the concession agreement. Under single-till mechanism, revenues from both aeronautical (landing, parking and ground handling) and non-aeronautical (duty-free shops, hotels, restaurants and airport infrastructure) segments are taken into account to determine the IRR.
However, under the hybrid till method, which is currently being used by joint venture (public private partnership) airports, only 30% of non-aeronautical revenue is taken towards IRR, allowing the operator to pocket 70% of the non-aeronautical revenue. The idea is to encourage the operators to expand airport infrastructure. But the lower revenue base compared to single-till method practically prompts the operators to levy higher charges (UDF) on passengers and airlines.
04/07/16 Bilal Abdi/Financial Express
