Airports are renegotiating contracts with service providers to bring down their operational costs.
Airports are renegotiating contracts with service providers to bring down their operational costs due to declining aeronautical revenues and pressure from airlines to lower airport charges.
Airport operators like Delhi International Airport Ltd, GMR Hyderabad International Airport Ltd (GHIAL), Airports Authority of India (AAI) and others have been able to bring down their operational cost “substantially” by reworking financials of their annual maintenance contract with service providers.
“We are renegotiating every contract to bring down our project cost. The current market situation has forced us to be more disciplined,” said B S Shantharaju, chief operating officer of the Delhi International Airport Ltd, at the Asian Routes Development Forum on Monday.
P Seth, board member - planning (operations) - Airports Authority of India, said the airport operators were seeking renegotiation of service rates with their contractors because of the falling costs of steel, cement and labour.
“That’s (re-negotiating contracts) an exercise, we are (also) undertaking in view of the costs of steel, cement and labour going down,” he said.
P S Nair, chief executive officer of GMR Hyderabad International Airport Ltd, said his airport has already been able to make substantial cost savings due to revised contract rates.
Airlines that are bleeding profusely due to overcapacity and falling demand have been resisting raising of airport charges by airport operators. In March, two of the largest airports—Delhi and Mumbai—raised their fees by 10%. M Madhavan Nambiar, secretary civil aviation, said that this was the first hike in ten years.
Nair said GHIAL has not exercised its options to raise airport fees by 38% under its concession agreement with the government because of the strong protest from the airlines.
“We could have gone in for an increase of 38% immediately after commissioning our airport. Today, after one year of operation, we could have raised it to 47% (to adjust the inflationary impact), but we have decided to keep our charges flat,” said Nair.
A 47% hike in airport fees at Hyderabad, Nair said, would mean an increase of Rs 23,500 on a flight of A320 aircraft.
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