'Class divide' in skies: Aera hikes Mumbai airport user development fee

The Airports Economic Regulatory Authority of India (Aera) has allowed Adani Group-led Mumbai International Airport (MIAL), which manages the airport in India’s financial capital, to charge a higher user development fee (UDF) from international business class passengers than from international economy class travellers until 2028–29.

 

GMR Group-led Delhi International Airport, which operates Delhi airport, was the first to receive approval to levy class-based differential UDF from international passengers in March this year.

 

Aera, in a statement on Thursday, said MIAL can collect a UDF of ₹615 from each departing international economy class passenger and ₹695 from each departing international business class flyer, starting May 16. For arriving international passengers, the UDF will be ₹260 for economy and ₹304 for business class.

 

Until now, a flat UDF of ₹187 has been charged to all international passengers, regardless of class. “This adjustment aligns with the ‘user pays’ principle and reflects the enhanced passenger experience and expanded facilities available to and used by international travellers,” Aera said.

 

The revised UDF will remain in force from May 16 this year to March 31, 2029 (the end of 2028–29), also called the “fourth control period”.

 

Aera on Thursday also decided to allow MIAL to start collecting a UDF from domestic passengers. It has been set at ₹175 for each departing domestic passenger and ₹75 for each arriving domestic passenger.

 

There was no UDF on domestic passengers during the third control period. However, MIAL had been collecting a “development fee” of ₹120 from each departing domestic passenger until August 2024.

 

Aera said that even at “non-major” airports, a UDF of up to ₹745 is being charged to each passenger embarking on a domestic flight. Any airport handling fewer than 3.5 million passengers per year is considered a “non-major” airport.

 

“Considering the scale of operations, infrastructure usage, and investment requirements at the Mumbai airport, which is the financial capital of the country, the authority finds it reasonable and consistent to recover a certain portion of the aggregate revenue requirement from the domestic UDF,” Aera added. 

 

The UDF has been set “nominally” for domestic air passengers, who comprise 75 per cent of total passenger traffic at the Mumbai airport, underscoring the “commitment to protect passenger interests, ensure affordability, and foster growth in the domestic aviation sector”.

 

“This treatment, in conjunction with the tariff adjustments for international travellers and other aeronautical charges, will support infrastructure development at the Mumbai airport and ensure the financial viability of the airport operator,” Aera observed.

 

UDF is a fee collected by airlines for passenger amenities and facilities provided at the airport. This fee is periodically transferred to the airport operator.

 

According to Aera, the UDF imposed will allow MIAL to earn a total of ₹2,942 crore until 2028–29. The authority also decided the aircraft landing charges, parking charges, aerobridge usage charges, etc., until 2028–29. These other charges will allow MIAL to earn a total of ₹4,324 crore in the same period.

 

Mumbai airport has two terminals — T1 and T2 — with T1 comprising three buildings: T1A, T1B, and T1C. T1 is scheduled to be demolished in November this year. The demolition of T1 at Mumbai International Airport is “necessary” to ensure public safety, Aera said in its March 10 paper after a site visit and an IIT Bombay audit, which found corrosion, seepage, and cracks in the terminal.

 

T1 and T2 currently have an annual passenger handling capacity of 15 million and 40 million, respectively. MIAL said the reconstruction of T1 is expected to be completed by September 2028. During the reconstruction phase, about 5 million passengers from T1 will be shifted to T2, while the remaining 10 million will be shifted to the Navi Mumbai airport.

 

The Navi Mumbai airport, being built by MIAL’s subsidiary, is expected to start commercial flight operations from June this year. In 2023–24, Mumbai airport handled a total of 52.8 million passengers, and it is expected to handle a similar number in 2024–25, MIAL said in March.

 

MIAL plans to invest ₹10,000 crore over the next five years in infrastructure development at the airport. The operator expects to recover ₹7,600 crore in revenue from an estimated 229 million passengers in the fourth control period. The proposed tariff structure lines up with those of other major airports in India and aims to enhance revenue stability while improving the passenger experience at Mumbai airport, MIAL said. 

Heavy on pocket

 

* UDF for departing int’l passengers: 

Economy class: ₹615

Business class: ₹695

 

* UDF set at ₹175 for each departing domestic passenger

 

* Revised UDF to remain in force from May 16, 2025, to March 31, 2029