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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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