Supreme Court allows AERA’s appeal on fees for airport services

The Supreme Court on Friday said the appeal by the Airports Economic Regulatory Authority (AERA) against a ruling by the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) was maintainable. The TDSAT ruling said AERA cannot regulate tariffs for non-aeronautical services such as cargo and ground handling at major airports, including Delhi and Mumbai. The court’s decision is a setback for airport operators, but good news for passengers.

A three-judge bench led by Chief Justice DY Chandrachud said the case will now proceed to a regular hearing before a final decision is made on the issue. "The appeals filed by AERA are held to be maintainable and [the court] has now listed the matter for hearing on merits," Chief Justice Chandrachud said.

How this affects you

Mint previously reported that this case could have a significant impact on the fees passengers pay for airport facilities and travel services.

AERA’s appeal challenges a January 2023 ruling by TDSAT that said non-aeronautical services are outside AERA’s jurisdiction, regardless of whether these services are provided by the airport operator or through contractors. This ruling was in response to pleas from major airport operators such as Delhi International Airport Ltd (DIAL) and Mumbai International Airport Ltd (MIAL).

AERA argued before the Supreme Court that under the Airports Economic Regulatory Authority of India Act, 2008, its mandate is to ensure fair competition and protect the public interest, particularly with regard to passenger tariffs. During the hearing, AERA underscored its role, saying, “Creating a level playing field, fostering healthy competition, encouraging investments, and regulating tariffs… for whom? For each one of the passengers — a section representing the public.”

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Experts previously told Mint that if the ruling went against AERA, it could lose its ability to regulate critical services such as ground handling and cargo at airports. Without AERA’s oversight, operators could raise prices and these hikes would likely be passed on to passengers, leading to higher costs for airport services.

On the other hand, a favorable ruling for AERA could significantly expand its regulatory authority, potentially creating a legal precedent that could allow other sectoral regulators to extend their powers.

The experts also said a pro-AETA ruling would likely necessitate changes to existing contracts between airport operators and their service providers. They said service providers could face reduced autonomy over pricing and airport operators such as DIAL and MIAL might have to adjust their business models to align with AERA’s tariff regulations. If the ruling favored AERA, contracts executed before 2008 would need to be revised in light of AERA’s regulatory framework.

TDSAT's order

Under DIAL's agreement with the government, the New Delhi airport operator and its concessionaires can set charges for non-aeronautical services – activities and operations at airports that are not directly related to aircraft or flight operations.

Apart from passenger and cargo handling, these include retail and dining services such as shops, restaurants and lounges; advertising and marketing services; real estate development; parking facilities; and rental services.

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However, in 2021, AERA issued orders stating that ground handling and cargo-handling would be non-aeronautical services if provided directly by DIAL, but aeronautical services if provided through contractors. DIAL challenged these orders in TDSAT, which ruled on 13 January 2023 that both cargo and ground-handling service are non-aeronautical, regardless of who provides them.

TDSAT found that AERA lacked jurisdiction over these tariffs and affirmed that MIAL could set its own charges. AERA argued that its authority under the AERA Act of 2008 allowed it to regulate ground-handling and cargo-handling services as aeronautical services. However, TDSAT upheld that the AERA Act respects existing agreements, and both services remain non-aeronautical.

The Airports Economic Regulatory Authority Appellate Tribunal was merged with TDSAT in 2017.

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