Chennai airport slashes user development fee

CHENNAI: The Chennai airport will be charging just Rs 69 per passenger as user development fee (UDF) from May 1. This is a steep reduction from the present Rs 166 for domestic passengers and Rs 667 for international passengers. However, experts say the airlines may not immediately pass on the benefit by lowering the fares due to increasing fuel prices.

The Airports Authority of India (AAI) has reduced fees in wake of the Airports Economic Regulatory Authority of India passing an order saying that the user development fee is reduced from May 1, 2018.

Once the order is implemented, it will cause the AAI a revenue loss of Rs 200 crore. Interestingly, on April 18, 2017, the AAI proposed to increase the user development fee to Rs 200 per domestic passenger and Rs 400 per international passenger while the AERA had suggested a total waiver of the user development fee in its consultation paper released in February.

The move to charge Rs 69 from both international and domestic passengers was taken after the AAI submitted that it requires an additional grant of Rs 300 crore to meet its operational requirements.Interestingly, the International Air Transport Association (IATA) has suggested that UDF should be removed as pre-funding of infrastructure investment by users. “Abusing airport monopoly by making consumers pre-fund investment is costlier than funding through financial markets,” IATA had observed.

Meanwhile, domestic and international landing charges have been reduced by approximately 89 per cent. This would also impact the revenue collected from landing charge which was Rs 305.6 crore last year. Now it will fall to Rs 59.7 crore this financial year.The move has been welcomed by the aviation industry which suggested eliminating unjustified differentials in landing charges between domestic and international flights.

When Express contacted sources in the aviation sector, they indicated that it is too early to decide whether the fares will be reduced or not. “The rise in oil prices has put pressure on the profitability of airlines and it is unlikely that the airlines will pass out the benefit to passengers immediately. Usually, the airlines will take time to come out with a decision on fare cuts,” said a source from one of the airlines in India.

The fuel throughput charge has also been reduced from Rs 1,774.4 to Rs 196. This comes as aviation industry has stated that fuel throughput charge has no cost basis and should be eliminated. The reduction will reduce the AAI’s revenue from Rs 131.7 crore to Rs 45.8 crore.

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User development fee for domestic and international passengers at the Chennai airport reduced to Rs  69
The AAI has been collecting Rs 166 from domestic passenger and Rs 667 from the international passenger as user development fee