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"Those fancy airport stores may help lower airfares"
Wednesday, January 25, 2017
Those fancy airport stores may help lower airfares
By Saurabh Sinha
India - Economic Times
NEW DELHI - The next time you confuse an airport with a mall, don't fret and
fume. Because higher "non-aeronautical" earnings will help the airport operator
levy lower charges on airlines. This will in turn mean lower fares for flyers.
The passenger-friendly move comes as the Airports Economic Regulatory Authority
(AERA) has decided to determine the future tariffs of major airports under the
`hybrid till' model. Under this, 30% of non-aeronautical revenue will be used
to subsidise aviation charges. It will also provide a boost to investment in
airport sector by ensuring funding to projects without burdening airlines -and
in turn passengers -with skyhigh charges.
However, the tariffs of Delhi and Mumbai airports will not be impacted by this
and continue to be determined as per the agreements with the airport operators
at these metros. "`Single till' may not be appropriate at this juncture when
there is high growth and capacity expansion is the need of the hour. The
Authority's methodology for tariff determination should be consistent with the
government policy ," AERA order says.
Several airport operators were in favour of the 'single till' model -where
non-aeronautical earnings are not used to cross-subsidise aero charges, leading
to higher charges for airlines. This, in turn, leads to higher fares and
airport user charges. Amber Dubey, head of aviation at KPMG, said in a Facebook
post that AERA's move was in line with the civil aviation policy . "This is
likely to boost investor sentiment in the Indian airport sector which has so
far seen tepid response from leading global players, despite huge growth
opportunities here. End of a six-year struggle. Good move (by) AERA," his post
"The `single till' mechanism does not provide adequate funds to airport
operators for taking up various expansion and modernisation programmes. `Hybrid
till' is more suitable for fund capital additions. One of the major functions
of the Authority is to ensure that the airport operator has adequate funds to
make capital additions at the appropriate time. `Single till' mechanism cannot
provide adequate funds to the airport operators in a timely manner and it
cannot be adopted uniformly at all times and at all airports," AERA order says.
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