Mangaluru International Airport in southern India has requested a significant increase in its fare structure, which will have a direct impact on the airlines flying there. Many Indian carriers, however, are unhappy with this and have asked the airport to consider other sources of non-aeronautical revenue. But is the solution that simple?


Increase in fees

Mangaluru International Airport (IXE) in the southern Indian state of Karnataka is the second busiest airport in the state after Bengaluru Airport (BLR). IXE sees regular flights not only in India but also in the Middle East, and since 2020 it is managed by Adani Airports Holding.

SIMPLEFLYING VIDEO OF THE DAY

Mangaluru Airport is looking to significantly increase its fare structure. Photo: Akshay Mantri

And now the airport is seeking an immediate 49-74% increase in passenger, landing and parking fees for the next five years to fund development activities. According to The Economic Times, Mangaluru Airport is also seeking permission to levy user fees on arriving and departing passengers, which is not usually imposed on arriving passengers.

Airlines push back

IXE’s request for a fee increase has not gone down well with some Indian carriers, who say the fee increase will affect their COVID recovery. The ET reports that the Federation of Indian Airlines (FIA), which includes IndiGo, SpiceJet and Go First, said IXE should consider non-aeronautical sources and subsidize passenger fees and landing and parking fees for airlines.

The airport’s pricing model allocates 30% of non-airline revenue to ease the burden on passengers and airlines. But fare regulator Airports Economic Regulatory Authority of India (AERA) suggests considering increasing other non-airline revenue streams, including duty-free shops, restaurants, lounges and car parks.

Limited scope

However, there seems to be little that Mangaluru Airport can do at the moment to generate revenue from other sources. IXE expects its non-airline revenue between 2021 and 2026 to be around ₹40,000,000 ($5 million).

AERA notes that this figure is far too low compared to other airports where non-air revenue accounted for at least 50% of total operator expenditure during the period. An increase in these revenues is directly linked to the increase in non-aeronautical areas in the terminal building.

Mangaluru Airport has selected the Adani Group through a tender based on a revenue sharing mechanism. Airlines are now calling on AERA to encourage the airport operator to enter into appropriate agreements with concessionaires to tap the non-airline revenue potential.

The airport, however, says the deal was signed during the pandemic when there was more emphasis on a minimum guarantee. This protected the airport operator from any unforeseen future events that could negatively impact non-airline revenue.

So far, there has been no statement from the Adani Group, but it remains to be seen whether the deal can be reviewed for a solution.

What is your opinion on that? Please leave a comment below.

Source: The Economic Times