Relief for flyers: No tariff hike at Kempegowda International Airport for now

Air passengers transiting through Kempegowda International Airport can heave a sigh of relief for now.

The Airport Economic Regulatory Authority of India (AERA) has ordered that the existing User Development Fee (UDF) and other tariffs will continue for the next six months, from April to September 30.

However, this is only an interim arrangement. The UDF could see a hike if the tariff determination process for the current Control Period (five-year periods in terms of aeronautical tariff), now in progress, is completed earlier than six months.

Citing revenue shortfall due to the Covid-triggered closure of airport operations, the Bangalore International Airport Limited (BIAL) had sought an increase in aeronautical charges.

Last year, AERA had revised both the UDF and landing charges at KIA for the 2020-21 financial year, effective from June 1, 2020. This was to recover the shortfall of Rs 136.82 crore due to the abolition of Fuel Throughput Charges (FTC).

For international embarking passengers, the UDF was fixed at Rs 839 and Rs 184 for domestic travellers. BIAL had then sought a 66% increase in landing charges, which the authority felt was high in view of the crisis in the aviation industry. The airlines had benefited from the abolition of FTC.

To moderate the burden, it was decided that the compensation should be shared by the airlines and passengers by a 70:30 ratio. The aircraft landing charges were revised accordingly.

Aviation analysts said AERA’s decision to maintain status quo for now could also be guided by the revenue earned by BIAL through cargo traffic, which had remained strong despite the pandemic.

To reduce the burden on airlines and consequently on the passengers via tickets, the state government could explore a reduction in the high taxes levied on Aviation Turbine Fuel (ATF), the analysts felt.

The authority contended that its latest order to maintain status quo on UDF was “to avoid any regulatory vacuum in respect of the tariffs being levied by the regulated entities”.

In a recent letter to its shareholders, Fairfax India Holding Corporation — which has a 54% stake in BIAL — had indicated that the UDF would increase significantly in the third control period (April 2021 to March 2026). The revenue shortfall due to the pandemic and the need for funds to complete the ongoing infrastructure upgrades at the airport were cited as reasons.