‘Hike in airport levy may hold up fresh investments’

Mumbai airport, on the lines of Delhi airport, is all set to increase charges for airlines starting February 1.

In an interview with the Business Line , the General Manager, South Asia, Air France-KLM, Yeshwant Pawar, points out that the increased charges at the two airports will add about €2 million to its annual operating expenses.

Mumbai airport has increased charges by 153 per cent. What impact will this have on airlines and their passengers?

For Air France-KLM the increase in charges is 143 per cent.

We can understand airports applying some increases but an increase at such an exorbitant level applied in one go is very difficult to understand and deal with.

Why is it difficult to understand? What they tell us is that if these charges had been raised over a period of time in the manner proposed then they would not been so high.

This question should be asked to them. Why burden airlines in one go? It is a massive increase. Planes are very expensive resources and addition of costs in one go means that we have to find ways to meet these costs.

Generally we try and see whether we can increase our fare levels. But we are not operating by ourselves in this or other markets, which means that we want to remain competitive. We also want to be serious about charging fair prices from consumers.

In my opinion if we will pass on all of this cost to our customers in India that will not be fair.

Is it a 143 per cent increase? What will it mean for an Air France-KLM customer?

For the Mumbai part, discussions are going on with our head office. But learning from what happened in Delhi and also trying to stay competitive and being fair to our customers, the increases that slipped into our fares were in the neighbourhood of five to seven per cent.

I do not expect it to be different but I cannot confirm that we will necessarily increase our fares.

Looking at Delhi’s example it is likely that it (fares) will be increased. We have fare cycles, so, our summer pricing will kick in as of April 1.

The impact will be felt from February 1 but you will wait till April 1?

We also have to deal with our internal systems and fare cycles and filing schedules.

So, if there is an opportunity to do it earlier… it is a complex procedure. But I do not see it beyond April 1, if not earlier.

In Delhi the increase saw fares for a round trip to Europe going up by Rs 5,000 to Rs 7,000. Is this the same price band that we are talking about for Mumbai?

The pricing in Delhi and Mumbai is the same. I will expect to see a similar increase in absolute terms.

Is there a rethink about India given that other airports within the country will follow suit?

Yes there is. While for Air France-KLM India remains a strategic market where we aim to continue investing and growing, the rethink part is that we have to probably make our goals more realistic in terms of this country making it difficult and costly to operate here.

I do not think it will be a question of whether we will not continue flying here. That is unquestionable. We aim to continue to be here but whether we invest further is the issue.

What do you mean about investment? Will it be lounges, hiring more people at airports?

All of these, including new destinations in India. We have stopped flying to Chennai and Hyderabad since 2009. That is not to say that we are not thinking of new destinations. But when things become difficult in a market such as this you tend to ask yourself can we put our resources somewhere else?

What would be the competing areas?

Take China, Brazil and Russia. If it is more profitable to do business anywhere else, I think it will be a logical business decision to invest there.

Is Skyteam or AF-KLM looking at any investment opportunity in India?

No. That is why it is important to project the image that this country is not only easy to do business in but it is also a country which is ready to compete on the world stage. With increases in one go like this, you send the wrong signal.

On the other hand, we continue to remain interested in finding a suitable partner in India.

If you want to come and invest here, you want to be sure that it is a stable environment and an environment which is reasonable in which to do business.

Is the industry planning to appeal against the Mumbai airport order as happened in the case of Delhi?

The first meeting is in February. I will be in favour of making an appeal. This is hurting us bad. So, we want to continue appealing.

>ashwini.phadnis@thehindu.co.in

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