User fee waived for Mumbai fliers

Following the revision in airport tariff by the Airport Economic Regulatory Authority (AERA) on Thursday, domestic passengers from Mumbai will not be charged a user development fee (UDF), while international passengers will pay half of the current levy.

Currently, domestic fliers from Mumbai are levied a UDF of Rs 274 (excluding service tax) which has now been done away with. International passengers pay a UDF of Rs 548 which has now been reduced to Rs 227 (excluding service tax). The international UDF  will see a revision to Rs 218 and Rs 278 in FY18 and FY19, respectively. The UDF is included in ticket price and is a direct levy on passengers.

The new charges will come into effect from November 1, and are part of the tariff order for a five-year period extending till 2019. However, for passengers, the relief from reduced UDF could be short-lived as airlines might hike fares to bear additional charges imposed on them.

In order to compensate for the loss due to reduction in UDF, the Mumbai airport has proposed a revision in landing charges it collects from airlines and the same was approved by the airport regulator. Along with landing charges, airlines also pay common user terminal equipment charges and fuel throughput charges. Overall, the tariff has been reduced by 4.6 per cent.

 

Domestic airlines which operate Boeing 737- or Airbus A320-type aircraft will now pay double the amount on each landing, while rates for wide-body aircraft (flown on international routes) such as the Boeing 777 or Airbus A330 have been reduced by about 15-20 per cent.

Mumbai International Airport Limited proposed reduction in charges on wide-body planes in view of capacity constraint at the airport and to encourage foreign airlines to start more services.  Airlines, which will launch a new direct foreign route will get a waiver in landing charges for those flights for a year.

Helicopters and aircraft with less than 80 seats will not attract landing charges based on a government directive.

Amber Dubey, partner and India head of aerospace and defence at KPMG, said the order needs to be studied in detail but prima facie, it appears that there may be an insignificant impact on ticket prices.

“From an optics perspective, the abolition of UDF for domestic and a sharp 59 per cent reduction in UDF for international passengers looks good. On the other hand, landing charges for A320s have been more than doubled for both domestic and international flights. The aerobridge charges for aircraft other than A320s have also been doubled or trebled based on size. In effect, what has been reduced for passengers may be recovered from airlines. Given the cutthroat competition on the Mumbai routes, we feel airlines may absorb some of the increased charges and pass on the rest to the passengers. Overall, the arrangement appears good for passengers but not so much for the airlines,” he said.

Last December, the airport regulator had slashed user charges at the Delhi airport by 89 per cent. UDF on domestic and international passengers at Delhi was reduced to Rs 10 and Rs 45, respectively, but the order has not been implemented because of litigation.

Similarly the regulator had abolished the UDF levied on passengers at the Hyderabad airport in 2014. However, the charges were restored after the Hyderabad airport secured a favourable order from the local high court.

“Airport charges have become a contentious issue for the airlines and have increased the costs. AERA should have more powers to implement its recommendations so that private airport operators cannot delay the process by moving the court again and again,” said a senior Air India executive.