Delhi's airport operator Delhi International Airport Ltd (DIAL) has warned that another year at current tariff would completely erode its net worth. The company fears that its net worth is down from Rs 2,450 crore to Rs 1,088 crore as of end-March, 2012.
The operator response has come at a time, when airport regulator, Airport Economic Regulatory Authority (AERA), has brought out a consultation paper on revision of tariff for Delhi airport.
The operator has expressed strong reservations against the tariff hike proposed in the paper.
The consultation paper proposes to increase the tariff by approximately three times in two phases. It proposed to revise charges by 148 per cent from April 1, 2012 and again by 148 per cent from April 1, 2013.
On the other hand, the operator wants a seven-fold increase. Delhi airport operator is part of the GMR group.
Airport charges consist of three components, landing and parking, navigational and ground handling and miscellaneous charges.
Mr Sidharath Kapur, Chief Financial Officer (Airports), GMR Group, said, “If the tariff is revised as per AERA's proposal, the operator will continue to incur loss even in 2012-13.” However, if the operator's proposal is accepted, then, there is a possibility of small profit in 2012-13.
The paper has also upset DIAL's calculations on when cumulative losses could be wiped out. “If the tariff is revised by three times, then we will have to wait till 2017-18 for the entire losses to be wiped out. However, a seven-fold increase will help us to achieve this by 2014-15,” Mr Kapur added.
He also said that tariff has not been revised during last ten years.
“Even if we take only the consumer price index during the last 10 years, the tariff should be doubled from the present level,” he pointed out.
The operator is also disturbed by the disapproval of its traffic projection by the regulator while proposing the revision.
It assigned the Madras School of Economics to prepare the data. It claims that this was done by adopting scientific methods.
However, the regulator, taking the help of another economic think tank, the National Institute for Public Finance and Policy, revised the estimates downward.
Mr I. Prabhakara Rao, Chief Executive Officer, DIAL, said, “As an operator, we get only parking and navigational charges, which is between 1.5-2.5 per cent of the total cost structure of an airline. So this cannot be taken as major reason for poor financial health of an airline.”
It is estimated that the airport charges constitute between six and nine per cent of the operating cost of an airline, of which 2.5-3.5 per cent goes for navigation (ATC under Airport Authority of India) and 2-3 per cent towards ground handling and others (independent agencies).
Meanwhile, the regulator has invited feedback, comments and suggestions from stakeholders on the proposals for tariff revision by January 24, before issuing the final order.