Domestic airlines are preparing for an increase in air-fares, saying they may be forced to do so in anticipation of a steep 40 per cent rise in airport charges proposed by the authorities in Bangalore, Hyderabad, Delhi and Mumbai.
On long-haul routes to Bangalore and Hyderabad, new airports being built under public-private partnerships, the increase could be roughly Rs 1,000. In Delhi and Mumbai, which are being modernised under PPPs, the increase could be a smaller Rs 300 on similar routes because these airports do not charge development fees.
According to sources, Bangalore and Hyderabad are planning to impose a user development fee of around Rs 700 per ticket.
"A 40 per cent increase in airport expenses would lead to a 2 to 3 per cent rise in overall costs and ticket prices. Apart from that, new charges like the development fees will be directly passed on to customers," said an Air Deccan executive.
"This will only discourage passengers from flying to airports like Bangalore and Hyderabad," he added.
Airport charges, such as route navigation facility charges, landing and parking fees, space rentals and ground-handling costs, account for 12 to13 per cent of an airline's costs.
SpiceJet CCO Samyukth Sridharan said the proportion could rise to 15 per cent after the fee increases. (ATF is the biggest cost, accounting for more than 47 per cent of an airline 's operating costs, up from around 40 per cent last year.)
Airlines say that after being outsourced to the airport developer, ground-handling expenses are expected to increase almost three times from Rs 4,000 to Rs 5,000 per flight to between Rs 12,000 and Rs 15,000.
Industry sources said landing and parking charges at Mumbai and Delhi airport are also slated to increase 10 per cent this year.
With the introduction of systems like the Common User Terminal Equipment, which allows check-in counters to be shared, airlines say they will have to pay Rs 6000- Rs 7,000 for an A320 operated flight.
"Though these terminals would lead to a 25 per cent increase in passenger-handling capacity per hour the charges would be many times more than we would have incurred per flight if we installed our own check-in counters and software. This will also be passed on to customers," said an executive from a full-service carrier.
"Considering that around 70 per cent of our flight operations are from the four metros, increased airport expenditure in these cities would impact our overall airport expenditure," said SpiceJet's Sridharan.
Other airlines like GoAir, who have 70 per cent of their operations from the four major cities, will be similarly affected.
Airport developers counter that many of the fears are exaggerated. "We have still not decided on the actual amount of developmental or other charges. So, fears that charges will adversely impact air fares are unfounded. We are still negotiating," said a senior executive of GMR, the main private developer building the new Hyderabad airport and modernising the one in Delhi.