Federation of India Airlines (FIA) - AERA

Preliminary Comments & Submissions on behalf of the Federation of Indian Airlines (FIA) in response to 

White Paper No.01/2009‐10 titled “Regulatory Objectives & Philosophy in Economic Regulation of 

Airports & Air Navigation Services : 

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PRELIMINARY COMMENTS & SUBMISSIONS 

1. These issue - wise preliminary comments and submissions are being placed on record for the 

consideration of the Authority, while seeking the liberty to add to and supplement these 

comments and submissions with more detailed submissions and evidentiary material and 

precedents 1 within the next 8 weeks or so. These submissions are organized under the 

following heads:- 

A. Submissions with respect to the issues identified in paragraph 5.1 (a) to (h) of the White 

Paper. 

B. Submissions with respect to some additional related issues. 

A. SUBMISSIONS re. ISSUES IN PARAGRAPH 5.1 

Re. Form of Regulation: Price Cap vs. Rate of Return vs. Light Touch 

2. It is submitted that ‘Price Cap mechanism’ should be adopted for airport charges, inter alia, 

for the following reasons:- 

(a) The advantages succinctly captured in the comparative table in paragraph 4.18 of the 

White Paper. 

(b) The expectation that in case the earnings of the airport operator are capped and its 

performance is monitored by the service level agreements, the resultant regime will be the 

suitable performance based regulation desirable to incentivize them to strive to achieve 

and maintain quality of services at the airports. This also ties in with the service quality 

standards monitoring. 

(c) It is submitted that all Aeronautical activities that are covered under Section 2(a) of AERA 

Act i.e. including Ground Handling, Cargo Facility, and Fuel supply infrastructure at the 

airport, should form part of Aeronautical revenue for the purpose of determination of 

Aeronautical tariff. Consequently, the regulatory asset base must also include investments 

made in these activities. Presently, Revenues arising from Ground Handling, Cargo and 

Fuel Supply are treated as Non-Aeronautical revenue, though they are integral part of 

1 As envisaged in paragraph 5.2 of the White Paper




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Aeronautical services. This is clearly enunciated in the concession agreement signed by 

MIAL and DIAL and hence would require modification going forward. 

(d) The belief that while determining the regulatory price-cap, the Authority would take into 

account, on a year to year basis the relevant factors including: 

(i) inflation, 

(ii) change in traffic volume (increase / decrease in number of passengers), 

(iii) additional major capital expenditure, and 

(iv) such other items which have a bearing on absorption of charges. 

Such a mechanism shall also take into account: 

(a) suitable flexibility in the Indian context, 

(b) suitable flexibility to adapt to the changing times, depending upon the growth of 

Aviation sector and the progress of Airport modernization and development at 

various locations, over a period of time; and 

(c) induce a more transparent and accountable system of charges being levied upon 

the users (directly or through the airlines), rather than a mechanism where all 

‘residual’ charges (costs which are not absorbed / paid by other stakeholders) are 

passed on through the airlines. 

(d) The Price Cap approach seems to provide incentives to reduce unit costs compared with 

the original forecast. 

(e) It is noteworthy that a multi-year price-cap regulation has been successfully implemented 

in UK and Australia, and has been strongly recommended by the Naresh Chandra 

Committee Report setting out the Road-map for India’s Civil Aviation Sector. 2 

Re. Treatment of non-aeronautical revenue; Adoption of Single vs Dual vs Hybrid till 

3. It is submitted that the Single Till concept may be adopted both for revenues and for 

investments, with the Capex to be netted-of against the deposits garnered by the Airport 

Operators), inter alia, for the following reasons:- 

2 Please refer to paragraph 4.3.1 of the Naresh Chandra Committee Report




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(a) The Single Till model perhaps lends itself to ensuring that the legislative objectives 

underlying the Airports Economic Regulatory Authority of India Act, 2008 (“the Act”) 

comprehensively, in particular the principles enshrined in Section 13. 

(b) The Single Till model would comprehensively factor in the revenues arising out of 

diverse activities that goes on at the airport and the facilities available there, 

yielding revenue for the Airport Operators, including the third party groundhandling, 

charges on fuel throughput, earnings arising from diverse retail spaces, 

hospitality sectors and all other forms of commercial exploitation of the real estate 

opportunity at the airports. Such multifarious non-aeronautical income-streams need to 

be recognized and factored before aeronautical charges payable by the airlines / 

passengers are determined. 

(c) The Single Till model incentivizes the airlines and the airport operators to optimize the 

footfalls at the airports. These passengers in turn avail of the non-aeronautical services at 

the airports which generates significant non-aeronautical revenue. 

(d) Since Price Cap mechanism considers the capex incurred / to be incurred, adoption of the 

Dual or Shared Till models would create significant implementation difficulties where some 

non-aeronautical revenues are preserved for expansions. To illustrate the point, - 

(i) Whilst Delhi and Mumbai airports pay certain percentages to the AAI as part of 

their concession agreements, it is not clear how AAI allocates this earning to 

airports under its management. This creates an anomaly where certain income is 

earned by the respective airport operators but it is not reflected while calculating 

the charges at other airports. 

(ii) If it turns out that this income is supporting loss-making airports, then the airlines 

should have a say in the matter of determining whether any one or more such 

airports are required or not. If such airports need to operate as an element of 

“essential air services” 3 , funding of such airports should come from the 

Government and not air passengers using other airports. 

As suggested vide pages 31 of 89 of the White Paper, adoption of dual or hybrid approach may 

lead to higher airport charges, as large capital outlays are associated with development of 

Aeronautical assets, while larger income is realizable from Non-Aeronautical services with least 

capital investment. 

3 As discussed at paragraph 2.22 of the White Paper and in the Naresh Chandra Committee Report




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Further from a reading of OMDA and the White Paper, the Aeronautical costs are subsidized only 

to the tune of 30% of Non-aeronautical income in dual approach methodology and hence single till 

approach appears to be best suited for both Airports and Airlines. 

As such, it is suggested that the AERA should in effect take precedence over any contractual 

arrangements (such as concession agreements etc.) between the airport operator and the AAI. 

THE FIA IS OF THE CONSIDERED VIEW THAT THE CONCESSIONS OFFERED BY THE 

CENTRAL GOVERNMENT VIDE ANY AGREEMENT OR MOU CAN, AT BEST, BE TAKEN 

INTO CONSIDERATION BY THE AERA WHILE DETERMINING THE TARIFF, BUT THOSE 

CONCESSIONS CANNOT BE THE GUIDING FORCE/PRINCIPLE BEHIND DETERMINING THE 

TARIFF AT THE AIRPORTS BY THE AERA. 

Re. Capital Investment: Need for user consultation and degree of regulatory oversight; and 

Operating Expenditure: incentives for efficiency improvement & cost pass-through 

The Authority while determining (and levying) tariff should adopt a transparent and consultative 

approach whereby all stakeholders using the airport and availing its service offerings are given a 

fair and effective opportunity to intervene and be heard 4 . 

To ensure that the regulatory model results in the desired outcomes consistent with the legislative 

objectives underlying the Act, it is desirable that:– 

(a) The projected capex and opex should be proposed by the airport operators to the 

Authority in context of the ensuing tariff period. It is desirable that some industry 

standards, norms and benchmarks 5 are established by the Authority after a public hearing 

process to guide the airport-specific projections. So for instance, in the case of some of 

the major airports, the concession agreement provides very clear incidences for 

commercial exploitation of airports. However, the airport operators do not exploit the real 

estate to the optimum level for whatever reasons. This has a huge bearing on the 

aeronautical charges; given that the revenue from the non-aeronautical charges is meant 

4 Please refer to the submissions under the head “Guiding Principles For Regulatory Processes” below. 

5 Like norms and principles guiding the determination of tariff, debt-equity ratio, reasonable return, 

depreciation, working capital, foreign exchange rate variation, etc. It will be instructive to examine the 

tariff principles governing power sector utilities as was enshrined in (a) the 6 th Schedule to the Electricity 

(Supply) Act, 1948 read with the depreciation notifications issued by the Ministry of Power, or (b) the 

Electricity Supply (Annual Accounts) Rules, 1985, or (c) the Tariff Regulations notified by the Central 

Electricity Regulatory Commission from time to time.




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to cross subsidize the tariff payable for the aeronautical charges. This gross mismatch 

between projections for non aeronautical revenue (i.e. what the airport operators are 

supposed to do under the concession agreements) and the actual level of commercial 

exploitation (and the realizations made therefrom) tends to have considerable impact on 

the aeronautical charges for airlines. 

As such, AIRLINES CANNOT BE BURDENED WITH AND EXPECTED TO ABSORB, 

THE HUGE COSTS (IN THE FORM OF EXCESSIVELY HIGH AERONAUTICAL 

CHARGES) INCURRED BY THE AIRPORT OPERATORS ON ACCOUNT OF THE 

INEFFICIENCIES ON THEIR PART IN EXPLOITING THE NON - AERONAUTICAL 

POTENTIAL (ESPECIALLY, REAL ESTATE) AT THE AIRPORTS TO ITS OPTIMUM 

LEVEL. 

(b) Each airport operator then should propose a long term plan for each airport 

showing trends of Capex and Opex which should be shared with the stakeholders. 

(c) Against such projections, the actual expenditure should be reported periodically to 

bring transparency in charges and duration thereof. The audited data for actual 

performance so submitted must be evaluated – both for capex and opex. 

(d) The actual expenditure claimed must pass muster of the standard of “regulatory 

prudency check 6 ” before it is passed onto any user. 

(e) At relevant points in time the stakeholders must be empowered to assist the Authority to 

secure efficiency and affordability without compromising the viability of the operations. 

This would be necessary in particular in context of any significant time and cost overruns 

or windfall gains and savings, in respect of which suitable regulatory mechanism and 

processes would need to be evolved to rebalance the consequential impacts. 

As huge investments are contemplated across various airports in the country including 

those privatized for modernization and the Green field airports, there is a greater need to 

evolve a mechanism whereby investments are justified either for capacity expansion or for 

technological obsolescence or replacement capital expenditure due to efflux of time. Just 

by way of example, while the Capital outlay for Mumbai Modernization project is about Rs. 

10,000 Crores, the Capacity expansion is a mere 20% i.e. from 700 Aircraft movements to 

840 Aircraft movements. For a similar spend at Delhi, with a marginal increase in 

6 

In this context, it would be instructive to examine the regulatory jurisprudence evolved in the electricity 

regulatory regime.




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expenditure in the subsequent years, there is a scope to triple the capacity. Under these 

circumstances, the cost of Airport operations at Mumbai will be disproportionately high 

compared to Delhi, which in itself requires justification for incurrence of such high costs. 

It is pertinent to note that during the current phase of modernization of Delhi and Mumbai 

Airports, the operating costs of all the airlines have increased manifold, due to 

taxiing/holding time both on the ground and in the air, as a result of Airport congestion, 

since the entry of new Airlines and the expansion of air services has preceded the 

enhancement of airport facilities. The cost increase has been considerable in the area of 

fuel burn, aircraft and engine maintenance, besides cost of flight cancellation due to 

delayed arrivals. Further, statistically speaking, the additional annual costs incurred by the 

Airlines, as a result of the above, is estimated to be in the region of Rs. 1000 Crores for 

the entire industry and against the backdrop of the above, the Airport charges that the 

Airlines are required to pay, during these times need to be lower, as Airlines, in any case, 

are saddled with huge infrastructural bottleneck costs. Furthermore, as Capital outlay for 

development is substantial, there must be transparency in cost incurrence mechanism, 

whereby information pertaining to costs can be made available at any time to the 

users/Airlines through AERA to ensure its justification, as is the case with Telecom and 

Energy sectors. 

As regards the operating expenses – the incentives for efficiency improvement and cost 

pass through, the users i.e. Airlines and Passengers must be provided with an opportunity 

to assess the cost increase, as it will have a multiplier effect on the entire sector leading to 

inflationary conditions, thereby impacting growth. 

Re. Form of Price Control and Tariff Structure 

It is submitted that the Authority should set individual / item-wise tariff rather than 

‘aggregate’ to obviate the cross-subsidization/price gouging problems that are likely to arise 

otherwise. This is also pertinent given the fact that various services are provided at an 

airport by various agencies such as the BSF, CISF, AAI, ATC along with the airport 

operator. Given the diverse component involved, while determining the tariff structure, the 

costs should ideally be segregated to the extent possible. As such, it is proposed that - 

(a) Each of the aeronautical and non aeronautical services, broken into each 

discernible sub-head, should be individually spelt out for the purposes of 

determining the tariff applicable to them. For instance, - 

(i) Under aeronautical services, the tariff should be itemized for communication,




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navigation and surveillance services (CNS), supportive communication landing, 

housing and parking of aircraft, meteorological services for air navigation, search 

and rescue services, aeronautical information services and so on and so forth. 

(ii) Under the non-aeronautical services, the tariff should be itemized for retail, hotel, 

car parking and so on. 

(b) The non-aeronautical revenue arising from the passenger should be used to offset/subsidize 

the passenger charges for the aeronautical services paid for by the 

passengers for the use of the airports. 

(c) The revenues derived from non-aeronautical charges imposed on airlines should be used 

to off-set the aeronautical charges payable by airlines at the airports. 

Currently, too many nomenclatures used to recover cost by the Airport operator. It neither justifies 

its incurrence nor its pass through mechanism. It is therefore prudent to seek bifurcation of the 

tariff structure levied on airlines by the airport operators to the largest extent possible. 

Also, for instance, there is a compelling need for transparency with respect to utilization of funds 

drawn towards Passenger Service Fee (PSF). Considerable charges are recovered from the 

Passengers through the Airlines and paid into a fund called PSF. From the reading of OMDA, 

there appear to be two components of PSF - Security Component and Facilitation Component. 

Security component (65% of PSF) is retained by the Airport Operator for and on behalf of 

Government of India to meet the CISF related expenses and excess, if any, is transferred to AAI. 

With Airlines continuing to face turbulent times, there is a need for greater transparency with 

respect to the utilization of funds both on Revenue and Capital Account. Further Vide 3.3.5 of the 

State Support Agreement, the respective airport operator has been made responsible for procuring 

and maintaining all security systems and equipments at their cost (Except arms and ammunitions 

which will be spent out of Security Component) as required by Government of India, Bureau of 

Civil Aviation Security or its designated nominees from time to time. With surging traffic flow into 

India, not to speak of domestic passenger growth now growing rapidly, there is a scope for review 

of PSF. In today’s time, there is a strong merit to reduce the incidence of “Security Component” of 

PSF by atleast 50% to help enable Airlines to tide over the difficult times. 

Another glaring example in this regard is the Airport Development Fee (ADF). The Ministry in the 

recent past has been approving development fee being levied on the passengers for development 

of Airports. Since it is a capital receipt in the hands of the Airport operator, it is free of revenue 

share to AAI and no income tax also applicable on such fee. The reasons cited for such a levy was




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to fund the Airport modernization program, at a time when there was a worldwide recession 

impacting Air Traffic, falling passenger loads, not to speak of investors shying away from real 

estate development. The Government did intervene to bail out Airports at a crucial time and now 

as better times are returning, with all round improvement in Air traffic, surging loads and recovery 

seen in all sectors of the economy, there is a need to revisit the continuance of development fee 

being levied on the passengers. 

As PSF and ADF being a cost pass through mechanism, the ability of the Airlines to raise fares 

becomes limited, as the end user is already burdened with such levy. If, for good reasons, such a 

levy is required to be continued till the end of its term, the AERA must direct the Airport operator to 

give space to the Airlines for the entire concession period at nominal cost to enable the airlines to 

reduce its administrative cost. 

The concession agreement and the State Support Agreement entered into between AAI, 

Government of India and the airport operator emphasizes the following, while determining tariff 

and its structure: 

Clause 3.1.2 of the State Support Agreement (SSA) – The aeronautical charges for any year 

during the term shall be calculated in accordance with Schedule 6 appended to the SSA. For 

abundant caution, it is expressly clarified that the Aeronautical charges as set forth in Schedule 6 

will not be negotiated post bid after the selection of successful bidder and will not be altered by the 

airport operator (i.e. MIAL and DIAL) under any circumstances. 

Clause 10 Schedule 1 – Principles of Tariff fixation – Within the overall price Cap, the airport 

operator will be able to impose charges subject to those charges being consistent with these 

pricing principles and IATA pricing principles as revised from time to time including the following – 

• Cost Reflectivity – Any charges imposed by the airport operator must be allocated 

across users in a manner that is fully cost reflective and relates to facilities and 

services that are used by Airport users. 

• Non Discriminatory – Charges imposed by the airport operator are to be nondiscriminatory 

as within the same class of users. 

• Safety – Charges should not be imposed in a way to discourage the use of facilities 

and services necessary for safety. 

• Usage – In General Aircraft operators, Passengers and other users should not be 

charged for facilities and services that they do not use.




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Clause 12.2 of Chapter XII of OMDA relating to Tariff and Regulation with respect to Nonaeronautical 

Services – Subject to Applicable law, the airport operator shall be free to fix the 

charges for Non-Aeronautical services subject to the provisions of the existing contracts and other 

agreements. 

Clause 12.3 of Chapter XII of OMDA relating to Tariff and Regulation with respect charges for 

Essential Services – Notwithstanding the foregoing, those Aeronautical and non- Aeronautical 

Services that are essential services shall be provided free of charge to the passengers 

While the White Paper documents a large part of the above, it is pertinent to note that there have 

been anomalies in the way the charges are being levied today either in the Pass through 

Mechanism or through direct increase in Aero / Non aero charges. Somewhere, the philosophy 

cited above is not being adhered to, prior to enacting any new levy or modifying the existing tariff 

structure. 

Clause 1 Page 13 of OMDA - The definition of Non-aeronautical Assets seems to have excluded 

real estate development and as a result, revenue from such activities may not be available for 

subsidizing the Aeronautical charges. WITH HUGE COMMERCIAL DEVELOPMENT 

ANTICIPATED OVER A PERIOD OF TIME AT THE AIRPORTS, THE PERCENTAGE OF 

REVENUE DERIVED FROM COMMERCIAL DEVELOPMENT AND EXPLOITATION OF REAL 

ESTATE AT THE AIRPORTS MUST BE CONSIDERED AN INTEGRAL PART OF NON- 

AERONAUTICAL REVENUE ALONG WITH THE OTHER NON-AERONAUTICAL SOURCES OF 

REVENUE IN ORDER TO REDUCE THE AERONAUTICAL COST FOR THE PURPOSE OF 

DETERMINATION OF AERONAUTICAL TARIFF. 

Please note that the above stated provisions from the OMDA and SSA are merely 

illustrative/indicative in nature, and not exhaustive. 

IT IS THEREFORE SUGGESTED THAT THE TARIFF STRUCTURE SHOULD BE DEVISED 

SUCH THAT AIRPORTS ARE ENCOURAGED TO DEVELOP THE INFRASTRUCTURE AND 

CHARGE AIRLINES, AFTER TAKING INTO ACCOUNT THE BUSINESS MODEL AND 

REQUIREMENTS OF THE VARIOUS AIRLINES. THIS WOULD WARRANT CONSTANT 

CONSULTATIONS BETWEEN THE AIRLINES AND OPERATORS. 

Re. Passenger Charges V. Airline Charges 

It is submitted that in keeping with the underlying principles of transparency and 

accountability, passenger charges and airline charges should be duly segregated by the




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Authority. This would be salutary to achieve the objectives of economic regulation of civil aviation 

in India which is inherently monopolistic in various segments, inter alia, since this would facilitate:- 

(a) Effective regulation of tariff and performance standards for each aspect. 

(b) Benchmarking of both tariff and service quality for various facilities amongst similarly 

placed operators. 

(c) Ensure that airports charge the passengers directly for the passenger facilities offered at 

the airport, rather than recover it indirectly through the airlines. 

It is important to note that any increase in Airport charges, whether recovered from the Passengers 

or from the Airlines, impairs the Airlines’ ability to pass on its own cost onto the passengers, 

leading to unsustainable operations both in the short and in the long run. 

Re. Service Quality Monitoring 

It is submitted that the performance monitoring of the airports should be conducted by the 

Authority through a credible third party agency of international repute selected jointly by the 

airports and airlines. 

There should be objective performance-based service level agreements which set out 

(a) the performance standards and service levels expected of airports, 

(b) cure mechanism for significant defaults, and 

(c) penalties for non-adherence to any of those standards with a suitable mechanism to 

enforce the penalties. 

The monitoring of service quality assumes considerable significance, as good quality and service 

standards at optimum cost will bring more passengers, thereby increasing the return to all the 

stake holders. This will also enable the passengers to distinguish the quality and service standards 

of the Airlines/Airports; thereby giving them the option of choosing the best from the standpoint of 

reliability, safety and service standards at the Airport.




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B. SUBMISSIONS re. SOME ADDITIONAL RELATED ISSUES 

1. Re. Definition of ‘major airport’ 

There is an emergent need for clarity regarding the applicability of the definition of ‘major airport’ 

under Section 2(i) of the Act with respect to the meaning of the term “designated to have annual 

passenger through-put in excess of one and a half million”. 

The following aspects of the Act are noteworthy :- 

(a) The Act does not prescribe the process or the basis for this designation. 

(b) The phrase “designation” is not a defined term. 

(c) The tariff determination under section 13(2) of the Act is for a period of 5 years. 

(d) The Authority is solely vested with the statutory functions of economic regulation of major 

airports. 

In this context, it is submitted that the Authority may clarify the following aspects:- 

(a) The process and basis for such designation of an airport, including the period for which the 

annual passenger through-put should be assessed; 

(b) Any airport whose annual passenger through-put and the annual growth trajectory, in 

context of the economic development of the regional economy that drives this growth, is 

such that that airport is expected to exceed 1.5 million annual throughput mark within the 

ensuing 5 year tariff period, that airport shall be brought under the purview of the Authority 

suo moto. 

(c) Define the process applicable to any AAI-managed airport or non-AAI airport coming 

under the purview of the Authority, whereby - 

(i) the performance standards relating to quality, continuity and reliability of service, 

and 

(ii) the tariff applicable will be aligned with those applicable to ‘major airports’. 

Further, once an airport qualifies as a “major airport” and comes under the purview of the




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AERA, the AERA needs to decide on the fate of the aeronautical and non aeronautical 

charges at such airport. In this regard a comfortable transition time should be given to ensure 

seamless transition for airlines from an ‘AAI governed airport’ to become an ‘AERA governed 

airport’ and the consequent changes in the tariff structure. So, for instance, the AAI, effective 

January 1, 2010, has imposed a User Development Fee in Jaipur Airport. Jaipur Airport is currently 

not under the purview of the AERA, but is strongly headed towards achieving the annual 

throughput as prescribed under the Act. (Statistically, as per AAI figures, during April-September 

2009 6.88 lakh passengers have travelled through Jaipur airport registering an increase of more 

than 24% over last years figure. Since the growth rate during the second half of the year is even 

higher the 1.5 million passenger mark will easily be crossed. In fact in 2007-08 Jaipur airport pax 

no. was 1.33 million and in 2008-09 it had declined to 1.20 million during the slow down period). 

2. Re. Major Airports to be made comparable to other global regional hubs 

It is submitted that given the quantum leap in passenger growth and the future of civil aviation in 

the country, it is imperative that ‘Major Airports’ be made efficient and competitive, so that the 

charges recovered by the operators for use of the airports make economic sense to the travelling 

public at large. In this behalf, it is submitted that the Authority must bear in mind that these airports 

must keep pace with other regional hubs such as Dubai and Singapore. 

It is submitted that the passengers (directly or through the charges levied through the airlines) 

should be made to pay for only those services that they actually avail at the airports. In this 

context, the successful regulatory development in broadcasting sector where the Telecom 

Regulatory Authority of India enforced regulations for carriers to provide unbundled television 

channels rather than bundled bouquets only to secure transparency, competition and value for 

money for customers. A similar development in the Indian civil aviation is the successful 

emergence of “low cost carriers”. Based on these models it is submitted that the Authority may 

ensure that all users of the airport facilities are offered a ‘menu’ of services and charged only for 

those services that they actually avail at the airports. 

3. Re. Tariff Determination for a period of 5 years 

It is submitted that there is a need to strike a balance between a light-handed 5 year multi-year 

price-cap tariff and the need to evolve a base-line of data, norms and standards to effectively 

regulate monopoly segments of civil aviation sector during the initial years. It is noteworthy that a 

classic light-handed 5 year multi-year price-cap regulatory regime would suit a stable regulatory 

environment where various transition developments have occurred, including but not limited to 

elements like :-




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(a) unbundling of various elements of aeronautical and non- aeronautical revenue; 

(b) information asymmetry; 

(c) establishing and enforcing verifiable and objective performance benchmarks for quality, 

continuity and reliability of services; 

(d) stable and uniform application of a regulatory regime to all airports without any special 

dispensations, other than those warranted or found reasonable in the economic context of 

an airport. 

Since Section 13(2) of the Act prescribes a 5-year tariff, the balance has to be struck under the 

“public interest” gateway provided in section 13(2) to establish in the first tariff regime:- 

(a) A baseline with very limited aspects treated as controllable, such that various aspects are 

under frequent true-ups and pass-through/re-adjustment for changes beyond a defined 

tolerance zone on both the positive and the negative side; 

(b) Focus on incentives for data discovery, such that the regulatory baseline for each airport 

can be revalidated in the first 3 years and robust industry standards evolved; and 

(c) The Authority retains flexibility to review the tariff and the regulatory baseline each time 

there is 

(i) a change in throughput and other key identified parameters beyond the defined 

thresholds, or 

(ii) specific defined milestone/landmarks are reached. 

This dispensation can be justified in light of the divergent tariff structures inherited by the 12 major 

airports under their respective regimes, which will need to be harmonized and brought into a 

reasonable range of the baseline regime. 

4. Re. Navigation Charges 

It is submitted that the determination of the navigation charges across all airports are the sole 

prerogative of the AAI, which must be kept at a level that:- 

(a) recovers the investments made with a reasonable but not usurious return or windfall,




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(b) while ensuring that the pass-through impact on the aeronautical charges is reasonable 

limits. 

Further, no cross subsidization should be permitted for such heads. 

5. Re. Transparency & accountability 

To secure transparency and accountability in the emerging regime, it is noteworthy that Section 

13(4) of the Act mandates this as the underlying principle for exercise of powers and discharge of 

functions by the Authority. In this context, the following principles are required by the regulatory 

and administrative jurisprudence to be ensured :– 

(a) Share with the concerned parties any analysis/document/material/directive under 

consideration of the regulator in regulatory processes/decision-making except for specific 

confidential information; 

(b) Provide an opportunity to object to/ comment on, in writing, during stipulated timeframe; 

(c) Consolidated issue-wise comments received from stakeholders to be shared with all 

concerned parties; 

(d) Secure a fair opportunity to explain, respond and participate at a public hearing; 

(e) Oblige the sector regulator to give reasoned decisions based on relevant material and 

consideration. 

(f) All regulatory instruments, processes and decisions, as also the principles guiding them 

should be a matter of public record. This record must be accessible to all market 

participants, not just service providers, to inform long-term business plans. 

_______________________________

Federation of India Airlines (FIA) - AERA

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