Charges threaten India's airlines

MUMBAI // The cost of flying in India is likely to rise dramatically because airports intend to increase service charges - exerting more pressure on an already struggling aviation sector.

The plans to increase charges have triggered a row between the Airports Authority of India (AAI) and the domestic airlines, which say they are already facing financial problems and cannot pay the proposed higher fees.

"The problem concerns all of the airlines so it will be a price increase across the whole industry.

"It will be a significant raise, too … Some routes could be up to several thousands of rupees," said Sharan Lillaney, an aviation analyst at Angel Broking.

The price rises will be passed on directly to customers as airlines have no other choice, he added. Airport authorities say they have no option but to raise charges as running airports is expensive - with operating costs, infrastructure, modernisation, maintenance and wages all adding to the pressure.

Landing and parking fees have changed little for a decade, except for a small rise in 2009, the airports claim.

"We have our high costs too, it's expensive to run airports," said a spokesman for the AAI.

"The airlines pay a tiny amount for using the facilities, less than 3 per cent of their revenues, and the prices have not been revised for a long time. We are in consultation with different parties."

Dial, Delhi's Indira Gandhi International Airport (IGI) operator, is firing the first salvo by planning to raise charges to airlines from April by more than 300 per cent, according to local media reports. Dial, however, has not confirmed the figure.

"Dial has filed for a revision in aero tariffs for the Delhi IGI airport as these have not been revised in over a decade.

"The revision in tariff is based on a methodology of tariff determination that is clearly laid down in the concession agreement," a Dial official said.

Airlines , in turn, are threatening to withdraw their flights from the capital, with SpiceJet's senior vice president, Kamal Hingorani, claiming such an increase in tariffs could even lead to some airlines shutting shop.

Mr Hingorani's predictions may soon come true as Indian airlines are in a dire state, with many of them haemorrhaging money.

Five of India's six main airlines - Air India, Jet Airways, Kingfisher, Go and SpiceJet - are making a loss. The exception is IndiGo, but analysts say even it may soon fly into the red.

Analysts are predicting serious problems for Indian airlines.

"The most likely casualty of the sector is Kingfisher," said Jasdeep Walia, an aviation analyst at Kotak Mahindra, a Mumbai bank.

"The airline has never made any money, even during more prosperous times.

"And now, as far as I am aware, 30 to 40 per cent of its fleet has been grounded already and unless they manage to renegotiate with the banks, I don't see a way out for them," he said. With net debt of about US$1.25 billion (Dh4.5bn), Kingfisher has been plagued by various problems, including loan repayment defaults and unpaid taxes and salaries.

Kingfisher did not respond to queries. But the airline's woes may be fortuitous for other airlines.

"The good news is that Kingfisher's demise would free up opportunities for other airlines.

"There would be more customers looking to fly on other airlines instead.

"But I don't know when it will happen," Mr Walia said.

business@thenational.ae

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