Passengers to bear brunt of 345% increase in Delhi airport charges

Last Updated: Wed, Apr 25, 2012 20:01 hrs

Using Delhi airport is set to get more expensive from May 15. The Airports Economic Regulatory Authority (AERA) has allowed Delhi International Airport Ltd (DIAL) to charge a User Development Fee (UDF) from both departing and arriving passengers.

UDF will be over and above the Airport Development Fee (ADF) charge of Rs 200 per domestic and Rs 1,300 per international passenger. it would range from Rs 195.80 to Rs 1,068 in the current year and from Rs 207.32 to Rs 1,130.85 in 2013-14.

ADF is charged to bridge the gap between the airport’s projected and actual construction cost. UDF is levied to help recover the cost of operating the airport.

AERA has approved an overall increase in aeronautical charges for the Delhi airport by 345.9 per cent, less than half the 770 per cent demanded by DIAL.

The Delhi airport is run by Delhi International Airport (P) Ltd (DIAL), a consortium of Bangalore-based GMR Group, which owns 54 per cent, Airports Authority of India (26 per cent) and Fraport AG and Malaysia Airports, which hold 10 per cent each. “Of the total increase, around 80 per cent is coming from UDF charges and the rest is in the form of increase in airport charges. The burden of increase has been passed on to the passengers directly instead of the airlines,” said an industry insider, who did not want to be identified.

This increase has come as a part of the Delhi airport’s mandated increase in aeronautical charges that was due since 2009, which has been challenged by both international and domestic airlines. But say the increase is huge and many would reassess their India expansion plan.

“The recent announcement is an unfriendly move for both passengers and airlines. Further, we foresee an approximate increase of $50–100 per ticket owing to this hike, which might lead to many airlines reassessing their operational viability in terms of capacity and frequency from the country. Delhi will not be a financially viable airport to operate to,” said Pieter De Man, GM (Indian Sub Continent), Air France- KLM.

The statement added the increase makes Delhi the most expensive airport in the Asia-Pacific region. Hong Kong and Kuala Lumpur are 70 per cent cheaper and it’s also more expensive that Osaka, Tokyo and Sydney.

The Indian airlines also say they have to pass on the increase in charges to the passengers. "It is a steep increase in airport charges. The airlines are in no position to absorb it and will be passed on to passengers. The landing charges have been doubled. At present, we pay about Rs 50 crore annually as landing charges to Delhi airport and we will end up spending Rs 100 crore now," said

M Shivkumar, senior vice-president (finance) Jet Airways, market leader in terms of passenger carriage.

The International Air Transport Association (IATA) has termed the proposed rate card unacceptable, as it violates the International Civil Aviation Organisation’s policy of cost-based charging. “It will also have a larger impact on India and its economy, with an expected five to eight per cent decrease in demand at Delhi as a result of higher costs, a fall in tourist arrivals and further damage to local and international airline connectivity. This is a big step backwards for Delhi’s ambition to be an aviation hub,” IATA has said.

Passenger associations have also protested. “Charging UDF to both arriving and departing passengers is unfair. We had registered our protests at all levels but we were not heard anywhere,” said Air Passengers Association of India president D Sudhakara Reddy.

DIAL welcomed the decision but said the revision was much below its expectations, considering the charges were unchanged for the past decade.

“Calculations show the approximate increase in ticket pricing on account of passenger fee per passenger for 2012-13 works out to Rs 290 on an average for domestic and Rs 580 on an average for international,” said a release from the airport operator.

It added that Delhi airport would compare favourably with other major global airports where passenger fees range from Rs 1,300 to Rs 1,560 on an average. It noted it had sought a 24 per cent return on equity and has instead been granted only 16 per cent.

“Similarly, for quasi equity-based return on refundable security deposits, DIAL has been granted nil return. These factors have contributed to the approved revision in aeronautical tariff not being in line with the expectation. Nevertheless, this increase will be a significant step in stemming the losses of DIAL and taking DIAL towards viability,” it said.

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