Charges for non-existent airports?

Why should air passengers pay for airport infrastructure that he may or may not get to use?

The Airport Authority of India’s (AAI) decision to allow Mumbai and Delhi airports to charge every passenger for future development has thrown up this question many times.

Starting April 1, every domestic passenger flying out of the Chhatrapati Shivaji International Airport in Mumbai will be charged Rs 100 and every international passenger Rs 600 as an airport development fee (ADF). The GMR group-led Delhi International
Airport Ltd (DIAL) is already charging its domestic passengers ADF of Rs 200 and international passengers Rs 1,300 from March 1.

The government is working on a similar fee for 35 state-owned airports that are being modernised. The government feels passengers should contribute to such large development projects.
But passengers wonder why. Akansha Dinkar, a 29-year-old, Mumbai-based IT executive, said, “It’s sensible to charge for using new developments (similar to toll charges for highways) but why should we pay for development of this infrastructure? This is the responsibility of the developer.”

The global airlines body, International Air Transport Association (IATA), too is opposing the government’s decision. In a statement, it said, “Pre-financing increases the costs of air travel when passengers are made to pay for facilities that are not yet in use. It is unfair as there is no guarantee that the passengers paying for future facilities today will use the service in the times to come.”

A Mumbai International Airport Ltd (MIAL) spokesperson felt the Rs 100 or Rs 600 charge will not be a deterrent for air travellers. “The AI Act makes us eligible to charge the passengers for future development and moreover, in today’s economic condition, this ADF will ensure that world-class airports are built,” he said.

An industry observer contradicted this view and said it is not a question of passengers not willing to pay but one of precedent. He said, “The practice of charging passengers for future development might not hold ground in a consumer court. It’s like paying for the Bandra-Worli sea-link when it’s not there.”

The ADF came about when DIAL approached the government to help fill the funding gap of Rs 2,739 crore out of the total Rs 8,975 crore needed for the upgradation of the airport. DIAL has already spent close to Rs 5,000 crore on the upgradation of terminals and the new runway at Delhi airport, which has been completed. The new domestic terminal is expected to be operational by April and the new T3 integrated terminal by 2010.

Delhi airport handled 21.8 million passengers in the April 2008-February 2009 period. A DIAL spokesperson said, “The ADF collected is only for a fixed period and the amount is being put in an escrow account and will be used for airport development, which will be transferred to AAI after GMR’s concession period is over.”

The GVK group-led MIAL is seeing a funding gap of Rs 2,000 crore, which it wants to fund through the ADF. “While our debt and equity funding is in place, funding from developing real estate and internal accruals has been low from what was projected due to the economic slowdown and drop in air passengers,” the MIAL spokesperson said.
The Mumbai international airport handled close to 21 million passengers between April 2008 and February 2009, as against 25.8 million passengers in financial year 2007-08.

A Delhi-based analyst said that the ADF being charged is actually part of the amount that the private developer that holds a stake in the airport is supposed to raise. “Why should passengers pay for privately-run airports, when they are not getting anything in return? Passengers do not have a stake in the airport,” he said on the condition of anonymity.

After the airports are developed, passengers are subjected to user development fees (UDF), too. While ADF is to meet shortfall of capital expenditure, UDF is for using existing infrastructure. GMR, which also runs the new Hyderabad International Airport, already charges domestic passengers a UDF fee of Rs 375 and international passengers Rs 1,000 at the Hyderabad airport. Every domestic passenger at the Bengaluru international airport pays Rs 260 and international ones Rs 1,070 as UDF.

Further, the government is mulling a similar UDF at some state-owned airports. Delhi and Mumbai airports are also planning to charge UDF and are currently working on the amount to be charged.

With such charges, air travel is becoming more expensive, something that might deter travellers further from taking the air route, say industry observers. The Indian airline industry has already been floundering with fewer people flying in the past few months.
Latest data on air traffic shows that domestic airlines flew 7% less passengers in February compared with the same month last year.