AAI mulling discounts to airlines for connecting small towns

AAI mulling discounts to airlines for connecting small towns
Flights from airports in small towns are likely to be a cost-saving proposition for airlines, with the Airports Authority of India (AAI) planning to offer discounts on landing and parking charges to any carrrier connecting such destinations.

Airlines like even the start-up carrier AirAsia India could avail of such discounts if they start operating from small towns and cities, where new airports have come up or the existing ones upgraded, in order to build traffic potential there, official sources said here.

AAI is considering offering the discounts on a graded basis, say for a period of three years. Such a move would be a major saver for the airlines as landing and parking charges constitute 10-12 per cent of their cost of operations.

As per the present proposal, AAI is offering an airline a 75 per cent discount on landing and parking charges in the first year of operation if enough flights were flown from these non-metro airports, the sources said.

In the second year, this discount could be 50 per cent and 25 per cent in the third year. AAI would start charging full tariff from the fourth year, they said.

These discounts are aimed at promoting regional airports and new routes, the sources said, adding that it takes time to build traffic demand on such routes and destinations.

However, the proposal to offer such discounts would need clearance from the Civil Aviation Ministry, they said.

They gave examples like flights between Bhopal and Jabalpur or from Chennai to Mysore or Puducherry or Vijaywada, or places like Kolhapur, Hubli and Belgaum where existing airports have been upgraded and flights could be operated.

In any case, the sources said that the tariffs charged by AAI were lower than what was being charged by private airport operators.

In a related development, top AAI officials recently held a round of discussions with representatives of AirAsia India on their plans to operate from such destinations in South India, including those in Tamil Nadu.

AirAsia India, which is likely to launch flights from October once it gets all the regulatory clearances, plans to operate from smaller airports in South India to begin with.

AAI's proposal on discounts is also believed to have come up for discussions, with the state-run airports body wanting to know AirAsia India's plans to operate on virgin routes and details about the estimated traffic they would generate on these routes and destinations.

Once traffic is generated, these new AAI-built airports would also become financially viable and it would be a win-win situation for AAI and the airlines, the sources said.

AAI, therefore, could consider foregoing some revenue initially by offering these discounts while aiming at long- term growth in traffic from smaller cities, they said.

The newly built airports at Kolkata and Chennai are currently using only part of the passenger-handling capacity that has been created there.

For instance, Kolkata airport has the capacity to handle about 20 million passengers, but handles only about 7-8 million. Similarly, Chennai airport also has a large unutilised capacity.

Offering such discounts would help airlines to generate more passenger traffic and effectively utilise the new capacity created at the new airports, they said.


Read more about: airlines, aai
Story first published: Tuesday, July 9, 2013, 9:46 [IST]
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