Infrastructure has long been a topic of discussion in India, especially in the aviation sector. The industry has finally got airports to match international standards in Bengaluru, Delhi and the upcoming T2 in Mumbai. Unfortunately, ATF costs, taxes, MRO facilities etc still pose a hindrance to the further growth of India’s aviation scenario. Routes Asia 2013 included the challenges and opportunities of developing airport infrastructure in Asia as one of the topics discussed at the strategy summit, a very appropriate one for India indeed. B Bhaskar, Director of Finance, Bengauluru International Airport Ltd (BIAL); Rajeev K. Jain, CEO, (Mumbai International Airport Ltd) MIAL; Yashwant S Bhave, Chairperson, Airports Economic Regulatory Authority (AERA); Sidharth Kapur, Chief Financial Officer of Airports Sector, GMR Group and VP Agarwal, Chairman, AAI formed the panel for the same while Amber Dubey, Head of Aviation, KPMG Advisory Services Private Limited acted as moderator.
Responding to Dubey’s question about the possible solutions to bring down airport costs, Bhave stated that the industry is at a learning curve. As it stabilises, the issues will be resolved. According to Bhaskar, “Large collaboration in the industry will have a role to play. Airport infrastructure will be driven by fixed costs, which is large investments, if the airline operates on high variable costs. Somewhere, they will have to meet, following which the affordability to pay for aviation will be more and the requirement for LCCs will be lower. Then you will see slabs of charges and customer segmentation that will drive the industry.”
Dubey went on to ask about low cost airports which are poised to be the future of the industry. Agarwal opined that low cost airports need regulatory relaxations. “We cannot compromise on runways and taxiways to reduce our costs. We can only compromise on terminals. We have done that for tier III and smaller airports.We have not cut down on capacities and capabilities and instead looking at cheaper material for construction. The biggest contribution, however, needs to come from state governments who can reduce tax and charges on the airports in those cities,” stated Agarwal.
Responding to the moderator’s question about ways to resolve problems within the aviation family, Kapur explained that the delay in tariff regulation was what fuelled the cost issues. He revealed that Delhi Airport incurred losses of Rs. 1300 crores over the three years of the delay in the regulation. “The rate of return on equity and deposits collected from monetisation of land and used for financing etc are pending with appellate. Financing is a complex subject. Lenders are definitely going to scrutinise our recovering ratio now. Adequate assurances have been given. The spiking and fall in the next control period, will have to be addressed,” he opined.
Speaking about the Mumbai International Airport’s limitations and possible solutions, Jain opined that the airport has space constraints for MRO facilities, which is being dealt with by providing these facilities in Nagpur and Hyderabad. He further added that for general aviation, the airport also faces parking constraints due to lack of space. The appropriate usage of the Juhu terminal will eliminate this issue and allow the airport to welcome more aircraft.
