Delhi International Airport Limited (DIAL) has invoked the force majeure clause to suspend the revenue share agreement with state-owned Airport Authority of India (AAI) as the pandemic has impacted traffic flows and revenue. DIAL operates Indira Gandhi International Airport, India’s largest in terms of passenger footfall.
According to the agreement signed between AAI and DIAL in 2006 as part of the privatisation process of Delhi Airport, DIAL pays 45.99 percent of its annual revenue as concession fees to AAI. DIAL deposits the money on a quarterly basis in an escrow account which AAI then transfers to its own account
DIAL has also moved the Delhi High Court to recover Rs 399.20 crore it has made to AAI since April as part of the revenue share agreement. Air transport was shut down from 24 March for two months, as the government had imposed a nationwide lockdown to counter the spread of coronavirus pandemic.
A DIAL spokesperson didn’t respond to queries in this regard.
The high court during hearing of the case on 9 September has asked AAI to submit a note declaring the treatment of Rs 399.20 crore deposited by DIAL in the escrow account
“A resolution to invoke Force Majeure clause was passed by the DIAL board in November and accordingly we had approached AAI for a cease on revenue share till traffic comes back to normal,” said a person aware of the development.
Regarding approaching the court the person said that DIAL wants that it should be allowed to use the money deposited in the escrow account for expenditure in maintenance of the airport.
Travel, both international and domestic, was among the biggest casualties of the lockdown. While domestic air traffic has recovered 60 percent of what it was in 2019, normal international travel has not resumed yet forcing airports to defer expansion and capacity expenditure plans. Mumbai airport has deferred capital expenditure of about Rs 3,000 crore while Delhi airport has postponed its expansion plan of Terminal 1 by a year.
According to Delhi Airport’s estimate, it will suffer a loss of Rs 1,330 in FY 21 as against a profit of Rs 383 crore in FY 20.
The force majeure clause by DIAL will further hit the finances of AAI, which will register a loss in FY21 for the first time since its formation in 1995. DIAL pays 45.99 per cent and MIAL 38.7 per cent of its revenue as fees to the AAI. This forms the bulk of the AAI’s revenue, making it one of the few profitable public sector units in the country. A complete waiver, said AAI officials, would force the authority to increase its external borrowings.
Earlier this month, the Delhi High Court has restrained the Airports Authority of India (AAI) from collecting 38.7 per cent of Mumbai airport’s revenue as annual fee in view of the adverse financial impact of the Covid-19 pandemic.
The court also restrained AAI from transferring funds from the escrow account to itself. The relief will be in place till an arbitral tribunal decides on the matter.
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