COVID-19: Pvt airports for moratorium on revenue share, levying fee on air tickets

Facing pressure on their cash flows in the wake of flight cancellations by airlines due to novel coronavirus (COVID-19) pandemic, private airport operators have pitched for putting a moratorium on revenue share for at least three months and levy a fee on air tickets to cover the expenses made towards deploying additional resources for screening international travellers.

While GMR group-led Delhi International Airport Pvt Ltd (DIAL) is required to share 45.99 per cent of its gross revenue with state-owned Airports Authority of India (AAI), the concession agreement with Mumbai International Airport Pvt Ltd (MIAL) requires the firm to part with 38.7 per cent of its revenue with the government agency.

The airports body representing seven private operators has in a letter to Civil Aviation Secretary PS Kharola has said that both aeronautical and non-aeronautical revenues have been affected due to flight cancellations by domestic and international airlines in the past few weeks. Further, many of their concessionaires such as food and beverage (F&B) service providers could default in the event of crisis continuing.

"Reduced passengers at airports have adversely impacted the non-aero revenues due to less sales at F&B and retail outlets. Non-aero concessionaires have already started asking for reduced revenue share or MMG which in turn will impact airport operatorsa revenues," Association of Private Airports Operators (APAO) has said in its communication to the nodal Civil Aviation Ministry.

The APAO said that ensuring compliance with government advisories on screening of passengers has required airports to significantly beef up its manpower deployment at airports as well as make expenditure on various items like masks, sanitisers and floor cleaners.

"Given our focus on passenger convenience especially at such a juncture, significant time and effort is being spent by senior management at all these airports. Infrastructure placed by airports are of fixed nature and not flexible in response to such fluctuations in passenger demand. Corresponding financial burden is also of fixed nature in terms of interest outgo and various other expenses," the industry body has said.

The operators which include firms managing the country's main aviation gateways like Delhi, Mumbai, Hyderabad and Bangalore have pitched for provisioning of an "airport operator alleviation package" to meet its additional expenditure. APAO has argued that airports are facing immediate cash flow pressures in the wake of flights cancelled by airlines but it does not have flexibility to reduce operating expense given that they are fixed in nature.

It noted that while airlines can choose to cancel flights or relocate their aircraft to other markets to reduce operating costs, airports face immediate cash flow pressures with limited ability to reduce fixed costs and few resources to fund capacity expansion efforts for longer-term future growth.

"For privately held airports, the situation is even worse as they do not benefit from relief measures but are obliged to continue paying concession fees," said the airports grouping.

With coronavirus spreading to nearly 110 countries and India quarantining itself by suspending all visas except few categories, travel, aviation and tourism sectors have been worst hit. Many of the travel industry bodies have urged the government to provide a relief package to reduce the adverse impact.

In order to address the growing severity of the coronavirus and ensure sustainability of operations for airport operators, the private airports have suggested close cooperation mechanism between industry and policy stakeholders.

The operators have suggested to allow the levying of a nominal passenger facilitation charge as part of airline fares to cover increased operating expenses being incurred by the operators and provisioning of an "airport operator alleviation package".

"The government may decide certain routes or all routes for imposing an additional fee on air tickets," an airport executive said.