GHIAL on Monday decided to levy $25 (about Rs 1,000) as UDF on international passengers from the new airport at Shamshabad, which is scheduled to open from the midnight of March 15.
Chitti C Pantulu & Praveena Sharma
Hyderabad airport developer to scrap user fee for domestic passengers
HYDERABAD/BANGALORE: The management of the Bangalore International Airport Ltd (BIAL) is likely to come under pressure to follow GMR Hyderabad International Airport Ltd’s (GHIAL) model to spare domestic passengers from the contentious user development fee (UDF).
GHIAL on Monday decided to levy $25 (about Rs 1,000) as UDF on international passengers from the new airport at Shamshabad, which is scheduled to open from the midnight of March 15.
BIAL, which begins operations from March 30, will not follow a cross-subsidisation tariff policy. It will be charge a UDF of Rs675 on domestic passengers and Rs955 on international passengers.
BIAL chief executive officer (CEO) Albert Brunner asserted that it would not be fair to levy charges on international passengers and spare the domestic passengers when both of them would be using the same infrastructure.
“The International Air Transport Association (IATA) can question airports if they charge a fee to international passengers and nothing to domestic passengers when both are using same facilities,” reasoned Brunner.
However, despite the BIAL chief’s refusal to oblige, domestic carriers are gearing up to lobby for a waiver of the fee on the domestic sector.
“The question is: What impact such a move (charging UDF from domestic passengers), would have on business, especially on short haul routes. Both (airport and airlines) would be at a disadvantage (business-wise). We have requested both airports to take a long-term view on this,” said Deccan Aviation chief financial officer (CFO) Ramki Sundaram.
Full service carrier (FSC) Jet Airways, which has 8-10% of its total passengers flying out of Hyderabad and Bangalore, is considering options of whether the impact of UDF should be localised or spread to all airport users.
At the same time, it is trying to push BIAL to scrap the levy for domestic operations. “We are lobbying with the Federation for Indian Aviation (FIA),” said K G Vishwanath, senior GM, MIS & investor relations, Jet Airways.
Meanwhile, GHIAL’s decision is expected to push back its break-even period. “The decision will have an impact on the company’s profitability and result in the break-even stretching out a little bit. But the board has decided not to levy the UDF on domestic passengers,” Kiran Grandhi, chairman, airports, GMR Group, said on Monday. At an appropriate time, we will take a call on charging domestic users, he added.
The GMR decision has come amid widespread criticism from passengers and interest groups on the hefty charges new airports in the country are set to levy on users.
Roughly two-third of the traffic (~8.4 million in the first year) at the new airport will be domestic passengers. Considering this, not levying a UDF on domestic passengers will have a significant impact on the company’s revenues.
Grandhi added that GHIAL was also examining introducing a differential UDF for short-distance and long-distance travellers.
As against the original estimate of a 6% growth rate at the time of conceiving the project, passenger traffic at the airport is likely to grow at 20-25% in the second year, Rajgopal Swami, chief financial officer and company secretary, GHIAL, added.
Grandhi said GHIAL has also decided that the parking fees for vehicles at the new airport should not be more than the fee collected at the existing Begumpet airport, while the first 15 minutes of parking at the Rs 2,500-crore airport will be free of charge.
Grandhi also confirmed that the management will levy a throughput charge of Rs 2150 per kilolitre on aviation fuel companies for use of infrastructure set up by GHIAL which is likely to be passed on to passengers by the airline companies which will have to pay more for the fuel loaded at the Shamshabad airport.
The base price for ATF in India is currently around Rs 39,000 per kilolitre. Tax and other levies take the total cost to Rs 52,000 per kilolitre, according to industry sources.
In a departure from the practice till now, where the oil companies invested on their own infrastructure at existing airports managed by the AAI, GHIAL is setting up a new open access model of fuel farming under which individual oil companies will use a shared and pooled infrastructure.
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