Airports regulator abolishes UDF for Hyderabad airport

As of now, domestic passengers pay Rs 430 as UDF with their ticket, while international passengers flying from the city pay Rs 1,700.

Flying from Hyderabad airport is set to get cheaper from April 1, as the sector regulator has abolished collection of user development fee (UDF) from the next financial year.

As of now, domestic passengers pay Rs 430 as UDF with their ticket, while international passengers flying from the city pay Rs 1,700. These will be history from April 2014. In its order placed on its website, the Airports Economic Regulatory Authority (AERA) said, “The Authority has determined UDF as zero with effect from April 1, 2014, till March 31, 2016 for both domestic and international embarking passengers.”

Hyderabad will now be the first airport in the country where UDF is being abolished. All major airports including Delhi, Mumbai, Kolkata, Chennai and Bangalore, among others, charge this fee. The fees do not go down well with airlines. AirAsia had, for instance, discontinued its international flights from the airport citing high UDF charges making it difficult for them to offer cheap fares (see chart). In Delhi too, international airlines have opposed the UDF.
An AERA source said that charges at Delhi airport could also see a decline for their second control period that begins from April 1, 2014.
The consultation process for Delhi and Mumbai airports — first control period for them ends on March 31, 2014 — will begin soon. He added that charges at Mumbai airport could remain sticky because operator MIAL have made sizeable investments in their new Terminal 2, which has just been opened to traffic.
GMR Hyderabad International Airport, which runs the airport, was not willing to comment on the AERA order saying they are in the process of going through it. “We do not wish to make any specific comments at this stage,” it said.

The AERA source said, “Based on the passenger growth figure, we found Hyderabad airport would not require any UDF for the next two years of their control period. (the period runs for five years)”. In the case of Hyderabad, the five-year control period runs from FY12 to FY16. UDF is charged to passengers to bridge the revenue shortfall an airport operator faces due to lower than projected passenger numbers and investments made in building the airport.

The source said the regulator made the calculations on what is known as the ‘single till’ model, which burdens the passengers least among the available models. In this model, both aeronautical and non-aeronautical charges are included to arrive at charges to be calculated at airports. “Charges at any of the airports should come down in their second control period, if the airport operator has not made any investments in building more infrastructure and passengers have been more than the projections,” said the source. GMR Hyderabad International Airport is a joint venture company promoted by the GMR Group that holds 63 per cent share. The other share holders are the Union government at 13 per cent, Andhra Pradesh government at 13 per cent and Malaysia Airports Holdings Bhd with a stake of 11 per cent.