Sector Monitor: Aviation

To protect flyers and airlines from escalating prices at private airports, the Ministry of Civil Aviation may, for the first time, look at awarding management contracts to concessionaire on the basis of tariffs quoted.

Published:May 6, 2015 2:58 am

Aviation 

To protect flyers and airlines from escalating prices at private airports, the Ministry of Civil Aviation may, for the first time, look at awarding management contracts to concessionaire on the basis of tariffs quoted.

* The government has initiated the process of awarding management contracts at Kolkata, Chennai, Jaipur and Ahmedabad airports to private operators.

* The proposal being considered follows a representation from airline bodies who have complained about high charges at private airports in India.

* The cost of turning around a short-haul Airbus A320 or Boeing 737 aircraft is $6,000 in India as compared with $2,300 at Changi airport in Singapore

* Under this model, the bidder quoting the lowest tariff would be awarded the project. The intention is to safeguard the consumer from steep rises in airport charges post privatisation

* Analysts, however, say the fixed-tariff model isn’t appropriate for sectors such as aviation. Such bidding is possible in sectors that are mature and where traffic and costs can be reasonably predicted, they said, adding this model has failed even in road and metro rail projects, with bidders backing out once they realise that traffic and costs are beyond what they had predicted.

* The govt had earlier this year considered privatising airports by setting landing and parking charges before the award and subsequent rises would be indexed to inflation.

* This suggestion by the Planning Commission was shelved because of the upward bias in charges even after an operator had recovered its investment. The aviation ministry also felt it would restrict the role of the Airports Economic Regulatory Authority.

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