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Delhi airport, India’s largest, is advocating for low-cost airlines to shift their flights to the upcoming Noida International Airport in Jewar and the smaller Hindon Airport in Ghaziabad. This move is aimed at allowing Delhi airport to focus on the high-margin business associated with handling full-service airline flights.
Currently, Delhi airport handles 8,554 scheduled flights per week, and IndiGo, a low-cost airline, accounts for about 38.5 percent of these flights, according to aviation analytics firm Cirium.
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The Noida airport, located about 70 kilometers from the Delhi airport, is scheduled to begin operations by the end of the year.
During a conference call with investors on February 1, Saurabh Chawla, executive director, finance and strategy at GMR Airports Infrastructure, said: “Jewar, when opened, will be primarily cargo-oriented and will cater to low-cost airline traffic. . We encourage this traffic to flow from Delhi airport to Jewar or Hindon or other regional airports, considering the margins we get from each passenger.”
Chawla further added, “Our strategy is focused on capturing a greater share of the high-margin business associated with full-service airlines, both domestic and international.”
DIAL, YIAPL, IndiGo, Air India, AIX Connect, SpiceJet, Vistara and Akasa Air did not respond to Business Standard’s queries on the matter.
Full-service carriers typically operate larger aircraft, such as the B777 and A350, generating more revenue for airports through higher landing fees and other charges.
Additionally, airports earn a higher margin per full-service passenger due to premium services such as high-end retail stores, lounges and amenities.
Last month, aviation consultancy CAPA India noted that competition between Delhi and Noida airports is expected to be intense, driven in part by the difference in value-added tax (VAT) on aviation turbine fuel ( ATF).
The VAT at Delhi airport is 25 per cent for domestic flights, while at Noida airport it will be only 4 per cent.
ATF constitutes around 40 per cent of the total cost of an airline in India.
However, Chawla emphasized that the success of airports does not depend solely on the different VAT rates applied to ATF. He highlighted the importance of the underlying community the airport serves, saying, “The mere fact that there is an ATF difference doesn’t really matter much. “What is much more important is the underlying passenger, the quality of the passenger, the income strata of the passenger and the growth potential that this particular airport will provide in the near term.”