Delhi airport invokes force majeure over revenue sharing with AAI

DIAL has also moved court to recover the money it paid to AAI since April

delhi airport, coronavirus, passengers, air travel
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
Arindam Majumder New Delhi
3 min read Last Updated : Dec 16 2020 | 11:10 PM IST
Delhi International Airport (DIAL) has invoked the force majeure clause to suspend the revenue-share agreement with state-owned Airports Authority of India (AAI) as the Covid-19 pandemic continues to impact traffic flow and revenue.

DIAL operates the 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 paid 45.99 per cent of its annual revenue as concession fee 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 Delhi High Court (HC) to recover Rs 399.20 crore it has made to AAI since April as part of the revenue-share agreement.

Air transport was inoperative from March 24 for two months. The government had imposed a nationwide lockdown to contain the spread of the novel coronavirus .

A spokesperson for DIAL did not respond to queries till the time of going to press.

The HC during a hearing of the case on September 9 had asked AAI to submit a note declaring the treatment of Rs 399.2 crore deposited by DIAL in the escrow account.
“A resolution to invoke the force majeure clause was passed by the DIAL board in November. Accordingly we had approached AAI for a cease on revenue share till traffic was back to normal levels,” said a person privy to the development.

He said DIAL had wanted to use the money deposited in the escrow account for expenditure on airport maintenance.

Travel, both international and domestic, was among the biggest casualties of the lockdown.

While domestic air traffic has recovered 60 per cent of its 2019 levels, normal international travel has not resumed yet, forcing airports to defer expansion and capacity expenditure plans.

Mumbai airport has deferred capital expenditure of Rs 3,000 crore, while Delhi airport has pushed back its expansion plan of Terminal 1 by a year. 

According to Delhi airport estimates, it will suffer a loss of Rs 1,330 in 2020-21 (FY21), against a profit of Rs 383 crore in 2019-20.

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 their revenue as fees to AAI. This forms the bulk of 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, Delhi HC had restrained 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.

Topics :CoronavirusDelhi airportAirport Authority of IndiaDelhi High CourtDomestic Air TrafficMumbai airport

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