Airfares set to rise for Mumbai, Delhi

MR Airports Ltd and Adani Airport Holdings Ltd will be able to earn higher revenues after a tribunal ordered a fresh calculation of the maximum amount they can make from operating the Delhi and Mumbai international terminals, respectively.

- Dipali Banka & Nehal Chaliawala

This, however, would make it more expensive for airlines and passengers to fly into and out of two of India's busiest airports.

Airport charges for the Delhi and Mumbai international terminals can rise by about 6% from the current revenue base over the next decade, as per analysts at Kotak Institutional Equities. The higher costs could be equivalent to 3.4% of the sales of IndiGo, India's largest airline, according to the analysts. The carrier reported a topline of ₹80,803 crore for 2024-25.

The issue centres around the calculation of the Hypothetical Regulatory Asset Base (HRAB), which governs how much revenue operators can make from an airport. The airport business is effectively a monopoly in most Indian cities, making it critical for regulators to cap the maximum earnings for operators to keep air travel affordable. Higher the HRAB, the more airports can charge in airport fees and tariffs.

The Airport Economic Regulatory Authority of India (AERA) had excluded nonaeronautical revenues such as from airport parking, food courts, and advertising from the HRAB calculation at Mumbai and Delhi, only factoring in earnings such as landing fees and passenger charges.

However, Delhi and Mumbai international airports, which were the first to be privatized in 2006, challenged this system in 2012-13, arguing that both aeronautical and non-aeronautical incomes should be considered for calculating HRAB. The case went on for more than a decade.