The Balancing Act

While airport operators and airline managements continue to debate the propriety of charges, it would finally devolve on the Airports Economic Regulatory Authority to reconcile the conflicting paradigms

As the Indian economy emerges from recession, business aviation is beginning to show initial signs of a rebound. Revival of interest amongst corporate houses in the latest business jets was visible at the recent exposition India Aviation 2010 held at Hyderabad in the first week of March. However, the following week, both the existing and prospective owners of business jets received a minor jolt. Corporate heads and senior executives who undertake journeys in company owned jets, can no longer access their aircraft in their company-owned vehicles. At the entry gate, they will compulsorily have to switch over along with their baggage to chauffer driven vehicles provided by the airport operator.

At the Chhatrapati Shivaji International Airport, Mumbai, such a passenger will have to shell out Rs 10,000 for a ride in a Mercedes Benz or Rs 8,000 in a Toyota Camry over a distance of 150 metres from the entry gate of the airport to the aircraft and back. For an accompanying assistant, an additional Rs 1,250 would be levied. For the VIP lounge if used, he/she would have to part with another Rs 5,000 for two hours and Rs 2,500 per hour beyond that. The management of Mumbai International Airport Ltd (MIAL) justified the new procedure for accessing the company owned aircraft and the charges levied as measures necessary to enhance security. Ostensibly, these measures have been introduced in the general aviation area “to address some non-compliances, to ensure standardisation and enhance airside safety in line with Directorate General of Civil Aviation guidelines as there were no checks and balances in the procedure to access the aircraft.” Corporate houses are not convinced as their own vehicles and drivers are also security cleared and equally safe. They feel that the new measures are meant just to raise easy money. It is only a matter of time before similar measures are adopted at other privately-operated airports.

Apart from business aviation, there are dichotomies in the various charges levied on air travellers and users of airports primarily on account of lack of clarity and regulation. On the one hand, private investors have made colossal investments in the world class international airports at Bangalore and Hyderabad as also in the extensive upgradation/modernisation of Indira Gandhi International Airport (IGIA), Delhi and the Chhatrapati Shivaji International Airport, Mumbai. While entrepreneurs are undoubtedly entitled to harvest returns proportionate to their investments, it appears that there are serious impediments in the process impinging on the credibility and future of the public-private partnership concept itself. An immediate problem plaguing the investors is default by the major airport users in payment of dues. For example, the domestic and international airlines together owe MIAL around Rs 200 crore. One particular airline of repute in the private sector owes Rs 60 crore to GMR Infrastructure Ltd for operations at IGIA, Delhi and Rajiv Gandhi International Airport, Hyderabad. Given the fragile nature of the airline industry globally, airport operators are understandably concerned as these dues have the potential to turn into bad debts. Airport operators have therefore tightened schedules for payment by airlines and are demanding bank guarantees to cover charges for aeronautical services for two months and non-aeronautical services for six months.