Is Assets Allocation Responsible For Hike in Delhi Airport Charges?

The recently announced hike of the Delhi airport charges which include the landing-parking charges and the user development fees have been widely criticized by the domestic and international airlines. The steep increase will make Delhi airport the most expensive airport in the Asia-Pacific region. The low-cost domestic carriers (LCCs) which used to provide the cheap air tickets have gone on to state that the hike will be transferred to the customers. Certain other airlines including the ones which provide the cheap international flights are likely to find this hike financially unviable to operate from Delhi, compelling them to reschedule their flights and operations.

It is noteworthy that the impact will be felt the most by the low cost carriers since the hike could mean shrinkage of the market which used to travel on the cheap air tickets. Therefore, domestic LCCs such as Indigo Airlines, Jet Airways and Spicejet are likely to be hit hard with this measure. The network or legacy carriers, too, will have to increase the ticket prices considerably, if not totally.

Why is it that the Delhi airport charges have become so high? The experts point out two major reasons for these high charges. The first reason is that the there has been an increase in the cost outlay for the project from what was projected initially to what has actually been incurred. While this increase was considerable, its impact could still have been absorbed had it not been for way the airport assets have been allocated. So, the second reason for the increase in the prices of the cheap international flights is the way the assets have been allocated to the aeronautical activities. It is common knowledge that there are different service providers at an airport and, therefore, the costs of the assets need to be carefully allocated to them. Experts believe that allocation of about 90 percent of the assets towards the aeronautical activity is what is making these charges so high. IATA has requested DIAL to study the assets allocation once again since the current allocation is not as per IATA-established guidelines.