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Centre plans to double airport capacity through Hybrid Till Model (Relevant for GS Prelims, GS Mains Paper III)

The existing airport terminals can handle 25 crore passengers per annum, according to AAI.  

Double airport capacity
The Centre will require up to Rs. 3 lakh crore for doubling the airport capacity over the next 10 to 15 years. The present rate of air traffic growth is 10% to 20% per annum.
At present, out of 125 airports managed by Airports Authority of India (AAI), 69 airports receive commercial flights.
The existing airport terminals can handle 25 crore passengers per annum, according to AAI.

Financing options
Airports in India are either run by the state owned Airport Authority of India or leased out to a private operator under joint Venture. The joint ventures are signed on either Single till, Double till or Hybrid Till Models. 

The joint venture lease agreement specifies the Internal rate of Return (IRR) in percentage which the Private operator is assured every year . Now, In the calculation of IRR, Aeronautical and Non Aeronautical Charges are considered. Aeronautical Charges are the landing, parking , ground handling and airport infrastructure charges . The revenue generated through Duty free Shops, Hotels, and other shops constitute Non Aeronautical charges. 

Any shortfall in the earnings to meet IRR through Aeronautical and Non Aeronautical Charges is made up by levying Airport Development Fee .

What is a single Till Model?
In the Single till model the entire Aeronautical and Non Aeronautical charges is taken into account for calculation of IRR.

What is a Double Till Model?
In double till Model only Aeronautical Charges are considered for IRR calculation.

What is a Hybrid Till Model?
In the Hybrid till model 100% Aeronautical Charges and only 30% of Non Aeronautical Charges are taken for Calculation of IRR. The remaining 70% of Non Aeronautical charges are allowed to be utilised by the operator for development of Airport Infrastructure.

Adoption of Hybrid Till Model in future
The National Civil Aviation Policy (NCAP) 2016 has initiated the process to abandon the single-till approach it has followed till date. In place of Single- till approach, hybrid- till approach will be used in future.
Evaluation of Hybrid-Till Approach

Advantages 
1.    It will lead to increased commercialization of the Airports
2.    Attract Private investment: It will revive the interest of the private developers in running the airports as the model increases their revenue by pocketing 70% of the profit generated from the Non-aeronautical segments
3.    Better and high quality airport infrastructure

Disadvantages
Increase in international and domestic airfares for passengers through user development fees (UDF)
How? If private operators are not able to meet their predetermined IRR then they will levy increased charges on the airlines which will further increase the passenger airfares to meet their own targets

Way Forward
If this model has to be implemented across all the airports of India , then the AAI (Airport authority of India) needs to keep the tariff reasonable by exploring ways and spreading the excess amount over the future without impacting the UDF



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