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AERA allows new airports to adopt hybrid model for tariffs

Regulator AERA has allowed upcoming airports to follow a hybrid model for determining tariffs that may lead to fliers shelling out more as airlines may pass on the additional burden to them.

Under the 'Hybrid Till' model only up to 30 per cent of the non-aeronautical revenues, which include segments like retail, food & beverages and parking, would be used for cross-subsidisation of aeronautical charges.

Aeronautical charges include those related to route and terminal navigation services. Currently, most of the airports follow 'Single Till' model whereby non-aeronautical revenues are completely used to cross subsidise aeronautical charges. With the new model, only up to 30 per cent of the non- aeronautical revenues would be used for cross subsidisation. Such a tariff mechanism could push the expenses higher for fliers as airport operators might hike the user development charges.

The new national civil aviation policy, unveiled in June last year, had recommended 'Hybrid Till' model.

In a six-page order, dated January 23, AERA (Airports Economic Regulatory Authority) said that in the future tariffs at major airports would be determined under "Hybrid Till wherein 30 per cent of non-aeronautical revenues will be used to cross-subsidise aeronautical charges".

With regard to Delhi and Mumbai airports, the regulator said tariffs would continue to be determined as per the State Support Agreement (SSA) between the central government and the respective airport operators.

According to AERA, 'Single Till' may not be the appropriate model when there is high growth and capacity expansion is the need of the hour.

Air Passengers Association of India (APAI) Founder and President D Sudhakara Reddy said the hybrid till model for determining tariffs at upcoming new airports would lead to "an increase in user development charges and could result in higher airfares".

This is a unilateral move by AERA and having such a model would also result in "profiteering" by the airport operators concerned.

Even though 'Hybrid Till' is widely prevalent in the aviation sector worldwide, AERA said, "one could perhaps argue over the sharing pattern laid down in the civil aviation policy of the government". "However these are matters which could be thought of for the future," it added. Following 'Single Till' approach at a time when new airports are being developed on 'Hybrid Till' basis has only resulted in differential treatment, AERA said.

"It is difficult to justify the basis for such differential treatment and it has also caused some regulatory uncertainty which is not warranted at a time when greater emphasis is being placed on private investments for airport development," it said. According to Reddy, AERA has reached this conclusion despite objections raised by airlines bodies –IATA and FIA –as well as by the grouping of cargo operators.
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