AIRFARES are set to soar as the Airports Economic Regulatory Authority (AERA) today approved a 345 per cent hike in airport charges at Delhi for the next two years and also acceded to the request of GMR-promoted DIAL,Delhis airport operator,to levy a user development fee (UDF) on all passengers including,for the first time,those who arrive at the airport. The new hike,effective from May 15 this year,means that a passenger will have to shell out at least Rs 1,153 just on account of the newly-introduced UDF and existing development fee for a Delhi-Mumbai round trip,and Rs 3,849 on a Delhi-London return trip. This will be over and above the 10-15 per cent increase in fares that airlines are likely to effect to pass on the burden of airport charges parking,landing and navigation that too have been hiked. The airline industry,led by its global trade body International Air Transport Association (IATA),an umbrella grouping of 240 airlines,has opposed the hike,saying that it will make Delhi the worlds most expensive airport. This increase in Delhis charges will put it (airline industry) in intensive care from a cost perspective. The proposed rate card is also unacceptable as it violates the policy of ICAO (International Civil Aviation Organization) of cost-based charging by having different landing fees for international and domestic flights. Charging UDF based on distance also violates this principle and in addition,distorts competition and creates a non-level playing field for carriers operating direct flights and carriers operating through an intermediate hub, said Albert Tjoeng,Assistant Director,Corporate Communications,IATA. While the AERA struck down the demand of DIAL (Delhi International Airport Ltd) for an over 700 per cent hike in aeronautical charges and 24 per cent return on equity,it has allowed a 148 per cent hike in airport charges for 2012-13 and 334.36 per cent for 2013-14. The April 24 order also allows a 16 per cent return on equity. It will be a differential UDF slab,determined by the nature of the flight (domestic/international),passenger (departing/arriving) and the distance travelled (short/medium/long). The UDF levy is in addition to the development fee. While the UDF is levied to meet the revenue shortfall,development fee is charged to meet the funding gap. On April 18,the AERA had approved development fee of Rs 100 and Rs 600 on departing domestic and international passengers from the Mumbai airport,from May 1 till April 2014,to meet a funding gap of Rs 800 crore. DIAL said the revised tariff was lower than its expectations. Considering additional investments done as per the terms of the concession,including capacity building and new features,the tariff hike effective from 15th May,2012,is less than half of the requested increase and is therefore inadequate. DIAL is making losses due to delay in revision of aeronautical charges and significant airline dues. Nevertheless,this increase will be a significant step in stemming the losses of DIAL and taking DIAL towards viability, it said. Airport charges have not been revised in the last one decade barring a 10 per cent hike in 2010. DIAL is expected to report losses of Rs 900 crore in 2011-12 compared with Rs 500 crore losses in the previous year. We cannot bear any additional cost. It will have to be transferred to passengers, Girgio De Roni,CEO,Go Air,told The Indian Express,and added that airfares may be hiked by at least 10 per cent. India is a price-sensitive market. We have to understand willingness to pay. We will have to reduce the number of flights. Customer will suffer. The airline may curtail its Delhi operations if the cost structure does not remain favourable,he added.
