MUMBAI/NEW DELHI: In what's seen as another blow to airline companies, reeling under high operating costs, the government-owned Airports Authority of India (AAI) has more than doubled the charges for ground handling services across 60 of its airports.
In a letter sent on July 31 to all airlines, without any prior consultation, AAI informed that effective August 1, ground handling agencies will have to pay between 32%-36% of their revenues to AAI from the earlier 13%.
"These cost increases forced by the government and other airport operators at a time when we are already grappling with high fuel charges and other taxes are difficult to explain.
If airports keep on increasing fees, how can we be cost efficient? It will be impossible to offer value to consumers as we will be forced to seek higher fares, hitting growth," said an airline CEO who didn't want to be named.
Ground-handling services include check-in, baggage handling, cargo handling, aircraft cleaning, loading and unloading of food & beverages on aircraft, providing electricity back-up to aircraft while they are at airports, supplying water to the carrier, ferrying passengers to and from planes, and maintaining toilets.
This will further increase operating costs as the ground handling agencies, called third party ground handlers, will pass on the costs to airlines which in turn will pass it on to passengers, making an already high-priced market even pricier. Airlines are terming this unilateral increase unfair as it comes at time when there's a slump in growth and fares are already high, impacting demand.
AAI's decision to raise charges comes close on the heels of the largest private airport operator in the country, Delhi International Airport, increasing tariff by more than 344% at one stroke, causing outrage among airlines which have taken the issue to the courts.
Justifying the higher ground handling charges, AAI officials said they were forced to increase charges as it has designated three authorized agencies to carry on ground handling in 60 of its airports, including Chennai and Kolkata, as deemed necessary under the new ground handling policy.
The new policy aims to eliminate outsourced manpower and restrict the number of service providers operating at airports to improve service standards, safety and security.
But since airlines opposed the implementation of the new policy and challenged it in courts, contesting the government move in the Apex court, other unauthorised companies already providing services at airports cannot be prevented from doing so.
As a result, AAI says it was incurring revenue losses. To stem the losses, AAI floated tenders to appoint designated companies to provide ground handling services, along with unauthorized ones until there's status quo.
"We were having a loss of business as ground handlers were paying us less - about 13% of their total revenues. After floating tenders, we have arrived at market-discovered royalty of 32-36% of revenue that the designated authorities have agreed to pay us. Others would be required to match this rate," said an AAI official, preferring anonymity.
In a letter sent on July 31 to all airlines, without any prior consultation, AAI informed that effective August 1, ground handling agencies will have to pay between 32%-36% of their revenues to AAI from the earlier 13%.
"These cost increases forced by the government and other airport operators at a time when we are already grappling with high fuel charges and other taxes are difficult to explain.
If airports keep on increasing fees, how can we be cost efficient? It will be impossible to offer value to consumers as we will be forced to seek higher fares, hitting growth," said an airline CEO who didn't want to be named.
Ground-handling services include check-in, baggage handling, cargo handling, aircraft cleaning, loading and unloading of food & beverages on aircraft, providing electricity back-up to aircraft while they are at airports, supplying water to the carrier, ferrying passengers to and from planes, and maintaining toilets.
This will further increase operating costs as the ground handling agencies, called third party ground handlers, will pass on the costs to airlines which in turn will pass it on to passengers, making an already high-priced market even pricier. Airlines are terming this unilateral increase unfair as it comes at time when there's a slump in growth and fares are already high, impacting demand.
AAI's decision to raise charges comes close on the heels of the largest private airport operator in the country, Delhi International Airport, increasing tariff by more than 344% at one stroke, causing outrage among airlines which have taken the issue to the courts.
Justifying the higher ground handling charges, AAI officials said they were forced to increase charges as it has designated three authorized agencies to carry on ground handling in 60 of its airports, including Chennai and Kolkata, as deemed necessary under the new ground handling policy.
The new policy aims to eliminate outsourced manpower and restrict the number of service providers operating at airports to improve service standards, safety and security.
But since airlines opposed the implementation of the new policy and challenged it in courts, contesting the government move in the Apex court, other unauthorised companies already providing services at airports cannot be prevented from doing so.
As a result, AAI says it was incurring revenue losses. To stem the losses, AAI floated tenders to appoint designated companies to provide ground handling services, along with unauthorized ones until there's status quo.
"We were having a loss of business as ground handlers were paying us less - about 13% of their total revenues. After floating tenders, we have arrived at market-discovered royalty of 32-36% of revenue that the designated authorities have agreed to pay us. Others would be required to match this rate," said an AAI official, preferring anonymity.
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