No user development fee for domestic flights from Mumbai airport

Landing charges for domestic flights to go up, airlines may hike fares

Domestic passengers from Mumbai will not be charged an user development fee (UDF) and international passengers will pay half of the current levy following the revision in airport tariff by the Airport Economic Regulatory Authority (AERA) on Thursday.

At present domestic fliers from Mumbai are levied a UDF of Rs 274 (excluding service tax) and now that has been done away with. International passengers pay Rs 548 as UDF and that has now been reduced to Rs 227 (excluding service tax). The international UDF will see a revision to Rs 218 and Rs 278 in FY 18 and FY 19. 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 five year period extending till 2019. However for passengers the relief from reduced UDF could be short lived and airlines may hike fares to bear additional charges imposed on them.

In order to compensate for the loss due to reduction in UDF, Mumbai airport 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. Over all 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 ) like Boeing 777 or Airbus A330 have been reduced by about 15-20 per cent.

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

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

Amber Dubey, partner and India head of aerospace and defence at global consultancy 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% 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 A-320s 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 in 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 for the airlines," he added.

Last December the airport regulator slashed user charges at 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 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.