NEW DELHI: A month before it launches commercial flights, Noida International Airport (NIA) has flown into controversy for the charges it is levying on airlines and passengers, which are offsetting the operational cost advantage from a lower value-added tax (VAT) on aviation turbine fuel (ATF) than Delhi's IGI Airport.
As a result, fares from the two airports are virtually the same, dashing any hope of the newbie offering a fare advantage to fliers who opt for it. Though Uttar Pradesh has decided on a 1% VAT compared to Delhi's 25%, NIA's interim passenger user charges are several times higher than those of IGI Airport, cancelling out the advantage.
IndiGo Raises Concerns
IndiGo, the first airline to announce flights from NIA, has pointed this out, warning it would make flying in and out of Noida costlier than Delhi and ultimately affect the new airport's footfall. The local BJP MLA in Jewar has also questioned Noida ticket prices and asked the Prime Minister and Chief Minister to intervene.
IndiGo's one-way nonstop fare on June 24 to Bengaluru from both IGI Airport and NIA is Rs 8,910; to Hyderabad, Rs 6,129; to Jammu, Rs 6,999; and to Amritsar, Rs 3,499.
NIA Operator Defends Charges
The NIA operator has defended the charges, pointing out that its tariffs are in line with those at comparable greenfield and brownfield airports in the country. IndiGo informed the Airports Economic Regulatory Authority (AERA) last month that NIA's higher tariffs and user development fees (UDF) will make overall fares paid by passengers travelling to and from NIA higher than IGIA.
This will consequentially discourage passengers from shifting to using NIA. As a result, the project's vision of effectively catering to the NCR catchment is significantly diluted due to the proposed rates.
AERA Approves Interim Tariffs
AERA approved an interim aeronautical tariff order for NIA so it can start operations and is in the process of regular tariff determination. IndiGo wrote to AERA last month, pointing out that aeronautical charges at DXN (NIA's IATA code) are considerably higher as compared to DEL (IGIA's code).
It pointed out that landing charges for big aircraft, the likes of Airbus A320 or Boeing 737, are 119% and 53% higher for domestic and international flights, respectively, at NIA compared to IGIA.
Similarly, UDF for departing and arriving domestic passengers is 406% and 404% higher, respectively, at NIA. UDF for international flyers, who will account for a small percentage of NIA traffic, is 85%-89% higher, IndiGo has pointed out.
Additional Costs for Airlines
Considering one round-trip operation (domestic) on an Airbus A321 aircraft, assuming a maximum takeoff weight of 97 metric tonnes, 232 seats and 85% load factor, this translates to Rs 1,88,000 additional cost as compared to IGIA. If an airline were to operate a modest scale of about 15 daily round-trip flights at NIA, the impact would be multiplicative and amount to about Rs 103 crore in additional costs as compared to IGIA annually. Also, the aeronautical charges for subsequent years keep getting higher for NIA, resulting in further increase when compared to corresponding years for IGIA.
NIA's Perspective
NIA's first phase was built at a cost of Rs 6,500 crore. By designing the airport for quick, easy processing, we help airlines keep operating costs low, which ultimately benefits passengers, the NIA operator said. The new airport has to recover its capex, and its charges, therefore, are likely to be higher than existing ones.
We have engaged with airline partners throughout the development of the airport and understand that tariff discussions are a normal part of the regulatory consultation process. Tariffs at NIA reflect the value we are delivering, not just in terms of infrastructure, but also in terms of efficiency, connectivity and passenger experience. Our tariff model is designed to spread recovery over a longer horizon, which keeps costs sustainable, the NIA operator added.
IndiGo's Warning
IndiGo has, however, told AERA that in our view, Indian carriers would need to keep all-inclusive airfares on par with IGIA, if not lower, to attract traffic to NIA. It warned that with such high costs leading to reduced demand, NIA will become commercially unattractive for operations at any meaningful scale.
Delhi International Airport Ltd (DIAL) has for the past two years been seeking a level playing field in terms of ATF taxation by Delhi government to prevent an exodus by airlines to Noida. In terms of airfares of flights available for sale to and from NIA as of now, there is no incentive for passengers to opt for NIA apart from the advantage of location, a big factor that has been proven in NCR by demand for commercial flights at the Hindon terminal in Ghaziabad.
Delhi International Airport Ltd (DIAL) has for past two years been seeking a level playing field in terms of ATF taxation by Delhi government to prevent an exodus by airlines to Noida. In terms of airfares of flights available for sale to and from NIA as of now, there is no incentive for passengers to opt for NIA apart from advantage of location, a big factor that has been proven in NCR by demand for commercial flights at the Hindon terminal in Ghaziabad.
