‘Hybrid Till may increase User Development Fee, hurt flyers’

The Centre’s decision to bring all airports under Hybrid Till model, under the new civil aviation policy announced last week, could make air travel expensive with a likely rise in User Development Fee (UDF), which in turn could drive up air fares.

Under Hybrid Till, total earnings by airport operators are computed by adding a part of non-aeronautical revenue from areas such as duty-free shops and hotels along with revenue from aeronautical services like aircraft landing, parking and ground handling charges. This means, for UDF computation, only a portion of non-aeronautical revenue will be taken into account for overall revenue, said sources.

At present, the government-run airports are under Single Till model wherein both aeronautical and non-aeronautical charges are taken into account to fix landing and parking charges thus reducing UDF. In Delhi and Mumbai, which are privately run, only 30 per cent of non-aeronautical revenue is added in total revenue, sources said.

D Sudhakara Reddy, Founder & National President, Air Passengers Association of India, said Hybrid Till is a ‘negative thing’ and will increase UDF, and in turn increase air fares. For instance, in Chennai, UDF is ₹120, which will increase to ₹150 in the new system. UDF is included as part of the airfare, he told BusinessLine .

The Civil Aviation Policy is said to ensure uniformity and level playing field among various operators, including the Airports Authority of India, and future tariffs at all airports will be calculated on the Hybrid Till basis.

B Govindarajan, Chief Operating Officer, Tirwin Management Services, an aviation consultancy firm, said considering the need for greater investments in airport ventures, Hybrid Till should be supported.

The Airports Economic Regulatory Authority of India should consider increasing the percentage of non-aeronautical revenues. If the percentage is initially for 25 per cent, there should be a mechanism to gradually increase it to higher percentage slabs on year-to-year basis. In the long run, Hybrid Till will eventually become Single Till since investments would have given rightful return to investors, he said.

There was a mixed reaction for shifting to Hybrid Till from Single Till with the International Air Transport Association (IATA), representing airlines globally, opposing it, while the Airports Council International (ACI), representing airports worldwide, welcoming it.

IATA said moving to Hybrid Till will make air traffic expensive as it will impact the basis for tariff determination for private airports. Passenger charges in India will increase, making air travel more expensive.

Welcoming the government move, the Airports Council International said in a statement that Hybrid Till will increase private investments in airports and enable the sector to play its role in facilitating growth in air travel. Of the 100 busiest airports in the world, half operate either under a Dual Till or Hybrid Till.

A balanced hybrid approach creates incentives for airports to develop commercial activities independently of their aeronautical activities. Commercial activity is a vital resource to drive modernisation of airport infrastructure and improve the quality of passenger service, the ACI said.

In the last five years, passenger traffic in India has grown 8.6 per cent on an average, well above the global average of 5.2 per cent for the same period.

Preliminary ACI forecasts suggest that the total passenger traffic in India will reach 320 million by 2020, up from 212 million last year, and double to over 600 million by 2030, placing India as one of the largest air transport markets in the world after China and the US, ACI said.

COMMENT NOW