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BW Businessworld

Public Versus Private

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Airport charges are going up In India but some cities will prove cheaper than others if the Airport Authority of India's (AAI) proposals to airports regulator go through. AAI's new terminals at Chennai and Kolkata are seeking an increase in charges and have proposed a new levy — a user development fee (UDF) — in line with those levied by private airports in Mumbai and Delhi. The increases and charges are, however, not as high as the private airports.

Speaking to BW, AAI chairman V.K. Aggarwal said the new Chennai airport will be operational by end-June, while the one at Kolkata is likely to be completed by the Puja festival. The state governments played a key part in the completion of the two projects, Tamil Nadu being more proactive than West Bengal.

According to Aggarwal, the charges at the two airports are likely to go up by around 50 per cent (they would still be far lower than the increases at Delhi and Mumbai). At Chennai airport, a UDF of Rs 160 has been proposed for domestic passengers and Rs 500 for international passengers. At Kolkata, the UDF will be higher at Rs 400 for domestic and Rs 1,100 for international passengers (see chart). This is because Kolkata sees a lower volume of traffic than Chennai.



AAI officials said their airports would provide services similar to the private airports but at a much lower cost. They said that some of the private airports had built very large infrastructure that was not immediately needed and that a phased development may have been a better approach to avoid the kind of losses they claim they are making. "Hyderabad, for instance, was in my view premature. The traffic did not justify such a large set-up with such high costs.Therefore, one can expect them to make losses," said one official.

In contrast, in Chennai, the existing domestic terminal has already reached saturation since the traffic is higher than the handling capacity. The new terminal built by AAI is meant to cater to 10 million passengers and will reach saturation by 2017-18. The state is planning a new green field airport after 2018 to cater to traffic demands.

While the look and feel of the new terminal built by AAI in Chennai is remarkably similar to that of the private airports, the final proof of the pudding will be in the eating. It remains to be seen whether the AAI staff and employees will cooperate to create a facility that is as efficient and smoothly run as the private ones. Going by their past record, one can't blame the travelling public for being sceptical.

(This story was published in Businessworld Issue Dated 28-05-2012)