Airport privatisation may lead to higher fares in India

NEW DELHI - The global airline industry IATA has warned the Indian government that the passenger in the country would end up paying much higher airfares if six major public sector airports in two metro cities and four state capitals are privatised after thousands of crores of public money have been spent to modernise them, according to Economic Times.
The civil aviation ministry, in co-ordination with the Prime Minister's Office and the Planning Commission, wants to hand over a majority stake and the operation and maintenance responsibilities of the Lucknow, Ahmedabad, Jaipur, Chennai, Kolkata and Guwahati airports to private players. These airports are owned and managed by the Airports Authority of India (AAI) and have been recently upgraded.
Expressing grave concern about the move to privatise these airports without stakeholder consultations, the International Air Transport Association (IATA) has said that "any unnecessary private shareholding" may increase the focus on "profit-maximisation" and lead to higher user costs.
"The privatisation of these six AAI airports will only serve to fuel a further round of increases in the airport cost environment, adding to costs for passengers and the airlines," IATA has warned in a missive sent last week to the government as well as the parliamentary committees in charge of transport and public sector undertakings.
Stressing that it is not against private sector equity participation in airports "if there is valid justification that is transparent to airport users and airlines", IATA has said "the rationale for private sector equity participation" is neither obvious nor clear in the case of these six airports, since they have already been upgraded by AAI at a sizable cost to the public enterprise.
"IATA appreciates that there is a need for airport infrastructure development in India to facilitate the country's aviation growth and that significant capital investment is required which could be partly provided by the private sector," states the letter written by IATA vice president (Asia Pacific) Maunu von Lueders, before questioning the objectives of privatising these airports.
The AAI manages 125 airports, but just a handful of profitable major airports, which includes the six that the government intends to put on the block to subsidise the heavy losses it suffers on account of running several small airports with low traffic. The authority has recently spent over 4,340 crore on the modernisation of the Chennai and Kolkata airports, raising questions about the need for private sector investments.
"Where public funding is available, privatisation should be needed. Where the issue pertains to availability of suitable management expertise, this can be achieved even without privatisation," that "management contracts" be awarded for improving operational efficiencies.
"It is important to ensure that past mistakes are not repeated and that the undesirable outcome of the sudden emergence of a high-cost environment that stifles traffic growth such as that witnessed at Delhi and Mumbai airports is avoided," the airline body has said, stressing that privatisation of public utilities like airports should not 'result in a failure to provide a cost-efficient quality service to users.'
Urging the government to shift its focus from "simply guaranteeing high returns to the private sector airport operator" to policy initiatives that are in the larger interest of the aviation sector and "India's national economy", Lueders has said that lower costs would drive traffic growth and benefit all stakeholders, including airports.

Sourced: TravelDailyNews