New Delhi: Domestic airlines have opposed a proposal by GMR Hyderabad International Airport to hike user development fee charged from passengers, saying the move may
lead to drop in passenger traffic.
The airlines, in a meeting with airport regulator Airports Economic Regulatory Authority (AERA) held in Hyderabad on September 29, expressed concerns that the move
may also encourage other airports to follow the suit.
AERA, in a consultation paper issued last month, had proposed to increase the user development fees (UDF) from Rs 340 to Rs 420 per departing passengers and from Rs 907 to Rs 1,656 for the airport on an ad-hoc basis as the Hyderabad international airport has suffered losses in 2008-09 and 2009-10.
"While the revised UDF rates may improve the viability of the airport, any increase may discourage the air passengers, which could eventually lead to drop in traffic growth," Air
India executive director Vinita Bhandari said.
As per the minutes of the meeting, the Jet Airways representative said that airport operator should not insist on higher charges as the aviation industry is just picking up
after a severe downturn.
Lauding the infrastructure of the airport, representatives of Kingfisher Airlines, IndiGo and Federation of Indian Airlines (FIA) also echoed the view.
They, however, felt that increase in UDF may lead to a dip in passenger traffic, affecting both the airlines and the airport.
FIA, in its submission, also added that while determining the benchmark rate for RoE (return on equity), the authority should take into consideration the fact that the airport
operators get significant revenue from non-aero services where returns/margins are much higher.
The proposed increase in levies would earn the loss- making GMR Hyderabad International Airport (GHIAL) an additional Rs 650 crore over the next three years and may enable it to turn profitable in this financial year itself.
The GHIAL, which termed the UDF levied at present as inadequate, had earlier sought to increase the user development fee from Rs 340 to Rs 500 per departing domestic
passenger and from Rs 907 to Rs 2,825 per departing international passenger.
The airport operator, which said that increase in UDF is required to maintain "globally benchmarked performance standards", was also backed by the state government.
A final call by the AERA on the issue is expected in next two weeks.