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Mumbai, Bengaluru and Kochi airports have hiked landing charges by up to 45 per cent, increasing the operating cost for airlines at a time they confront severe financial distress.
Airlines may be forced to increase ticket prices as three private airports -- Mumbai, Bengaluru, and Kochi -- have hiked their landing charges by up to 45 per cent.
This will increase the operating cost for airlines at a time they are facing financial constraints because of the two months of grounding and weak demand.
The user development fees (UDF) for Bengaluru airport has also been increased by 17 per cent for international passengers and 3 per cent for domestic passengers.
The increase in landing charges was allowed by the Airport Economic Regulatory Authority (AERA) -- the regulatory body which fixes charges for airports.
Airports had demanded a hike in charges to compensate for the loss of revenue because of the discontinuation of fuel throughput charges (FTC). The civil aviation ministry had discontinued FTC in January this year.
The discontinuation of FTC allowed airlines to take benefit of input tax credit. Airports levy charges, such as FTC, infrastructure charges, and into-plane charges on sale of jet fuel.
The levy used to be passed onto airlines, pushing up the operating cost. The move to discontinue FTC had led to revenue losses for airports. According to the AERA's calculation, Mumbai, Bengaluru, and Kochi airports were to lose Rs 106 crore, Rs 140 crore and Rs 46 crore, respectively, in a year.
“Mumbai airport has stated that the government was supposed to compensate operators for the loss of revenue because of the withdrawal of FTC. Accordingly, the authorities have decided to increase the landing charges by 27.88 per cent to compensate the airport operator,” an order from AERA, reviewed by Business Standard, stated. On similar grounds, Bengaluru airport and Kochi airport demanded an increase.
Airlines had demanded that any increase in charges be deferred as they have been hit hard by Covid-19.
“Any increase in airport charges for the remaining period will worsen the crisis for airlines. Airport operators should equally play a role in this situation by lowering their profit expectations and help provide the much-needed financial help to airlines,” said Federation of Indian Airlines, which represents IndiGo, SpiceJet, and GoAir.
However, the airports stated that the demand of airlines to defer charges citing the Covid-19 crisis was not feasible because the increase is just a compensation for the lost revenue and not a further addition.
“The AERA has only ensured revenue neutrality by compensating for the loss of revenue which was demanded by airlines to avoid double taxation of GST. It doesn’t put any additional burden on airlines,” said the Association of Private Airport Operators, which represents PPP airports like Delhi, Mumbai, Bengaluru, Kochi, and Hyderabad.
