Airport Operators Seek Urgent Relief from 25% Cut in Landing Fees

Sources said the Airports Economic Regulatory Authority (AERA), pursuant to directions of the Central Government, has reduced landing and parking charges at all major airports by 25 per cent with immediate effect for a period of three months.

Sources further said that the Airport Operators Association of India (APAO) has written to the Ministry of Civil Aviation, expressing support for the policy intervention aimed at providing immediate relief to the civil aviation sector.

According to sources, the letter stated that any consequential under-recovery in the Aggregate Revenue Requirement (ARR) for airport operators would be trued up in the next control period.

However, sources said the operators have raised concerns that, given the uncertainties in the evolving geopolitical situation, the order is likely to materially affect airport operators' immediate cash flows, debt repayment ability and operational sustainability.

Sources said airports in India, particularly those with substantial exposure to international traffic, are facing traffic reductions, revenue losses, cost escalation and operational risks. Sources added that airport operators are also incurring significant losses in non-aeronautical revenue, which cannot be recovered.

Sources further stated that the operators have flagged that the revenue losses in the aviation sector are not limited to airlines alone.

According to sources, the operators have also raised concerns that the abrupt change in airport tariffs, without consultation, may affect regulatory certainty in the Indian airport sector, which has been built over the last 16 years by MoCA and AERA. They added that this comes at a time when the government is looking to privatise more Airports Authority of India (AAI) airports and state governments are awarding new greenfield airports to private investors.

Sources said AERA has not adequately considered the operational mix, including the proportion of international versus domestic traffic at different airports, leading to varying financial impacts. They added that a uniform 25 per cent reduction creates revenue imbalances and may be seen as arbitrary, with operators suggesting a differentiated, airport-specific approach.

Sources further said that airport operators are contractually obligated to remit revenue share or per passenger fees to AAI under concession agreements, and in the absence of any interim relief, the burden of tariff reduction disproportionately falls on operators.

According to sources, concessionaires operating at airports are also seeking waivers citing loss of business due to the prevailing geopolitical situation, adding to the financial strain.

Sources said there has been no reduction in airport operating expenditure, as infrastructure, service quality, safety standards and benchmarks must be maintained, resulting in fixed and non-deferrable costs.

Sources further said that while future true-up of under-recoveries has been provided for, the immediate cash flow mismatch is placing significant strain on airport operations and debt servicing.

To address the situation, sources said airport operators have requested MoCA to consider several measures.

Sources said these include directing AAI to defer payment of revenue share or per passenger fees equivalent to the projected reduction in landing and parking charges during the relief period, without interest or penalty.

Sources further said operators have requested AERA to revise landing and parking charges upward immediately after the relief period and to true-up under-recoveries.

According to sources, operators have also suggested that losses could be compensated by increasing User Development Fees (UDF) for international passengers during the same period to avoid future true-ups.

Sources added that operators have requested that any deferment of payments to AAI should not be treated as a default under concession agreements, and no interest should be charged.

Sources also said operators have emphasised the need for MoCA to ensure that the benefit of reduced landing and parking charges is passed on by airlines to passengers, though they noted that airline pricing remains largely unregulated and there is no enforceable mechanism to ensure lower airfares.

Sources further said that Aviation Turbine Fuel (ATF) constitutes a larger portion of airline costs compared to landing and parking charges, and suggested that MoCA may request state governments to reduce VAT on ATF to 5 per cent or below.

In conclusion, sources said airport operators have reiterated their commitment to supporting government initiatives aimed at protecting the interests of domestic airlines, while stressing the need to ensure that airports remain financially resilient and capable of meeting debt obligations, as they are critical infrastructure assets largely funded by public sector banks.

- ANI