Private airport operators seek facilitation fee to tackle rise in operating expenses

Letter to Centre also demands an airport operator alleviation package

The Association of Private Airport Operators (APAO) on Friday requested the Central government to allow levying of a nominal passenger facilitation charge as part of airline fares to cover increased operating expenses being incurred in the wake of the novel coronavirus (COVID-19) outbreak and fall in passenger volumes.

In a letter to the civil aviation secretary, APAO also sought provisioning of an airport operator alleviation package by the Airports Economic Regulatory Authority to facilitate the growing operational expenses, released in the next control period of applicable airport operators.

Citing Airports Council International (ACI) estimates, APAO said the Asia-Pacific region is suffering the most, with passenger traffic volumes down by 24% in the first quarter of 2020, compared to the forecast traffic levels without COVID-19. Against this gloomy background of sharp declines in traffic and passenger throughput, airports’ aeronautical revenues and non-aeronautical revenues are seeing similar declines.

The ACI World Airport Traffic Forecasts 2019-2040 project revenue loss owing to COVID-19 to the tune of $3 billion. “While cancellation of flights by various international and domestic carriers (a measure by airlines to save operational expenses in response to muted passenger demand) has impacted the air traffic management-related revenues for airports, reduced number of passengers has hit the passenger-related revenues,” APAO secretary general Satyan Nayar said.

Mr. Nayar said reduced passengers at airports have adversely impacted the non-aero revenues due to less sales at food and beverage and retail outlets. “Non-aero concessionaires have already started asking for reduced revenue share or minimum monthly guarantee which in turn will impact airport operators’ revenues.”

Besides, APAO said ensuring compliance with the government advisories on screening of passengers has required airports to significantly beef up their manpower deployment and spend on various items like masks, sanitisers, and floor cleaners.

“These issues are impacting the airport adversely with no offset or compensatory stream available and are severely impacting the cash flows for the airport operators,” Mr. Nayar said. He pointed out that this is unlike airlines which have got one major compensatory stream in terms of significantly reduced (more than 50%) crude oil prices, which make up almost 40% of their operational expenses.

APAO in its appeal to the government said it is also pertinent to mention 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 long-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 to the regulator,” the APAO letter said.

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Printable version | Jun 1, 2020 5:01:34 AM |

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