Private airport operators seek govt support, higher UDF for international passengers to compensate revenue loss

New Delhi: Private airport operators have urged the government to provide regulatory support and increase the User Development Fee (UDF) for international passengers to compensate for their revenue loss due to the temporary cut in landing and parking charges.

Follow The PSUWatch Channel on WhatsApp

As part of efforts to provide relief to domestic airlines facing significant headwinds in the wake of the West Asia conflict, Airport Economic Regulatory Authority (AERA), on April 7, announced a 25 percent reduction in landing and parking charges for all domestic flights across major airports.

The reduced charges will be in place for three months.

Against this backdrop, the Association of Private Airport Operators (APAO) has written to the civil aviation ministry, seeking "urgent policy and regulatory support for the airport operators", saying that reduced charges are likely to materially impact their immediate cash flows, debt repayment ability and operational sustainability.

The association described AERA's decision as "arbitrary" and a differentiated, airport-specific approach would better align with the principles of cost causation and equity.

"Airports in India, particularly those with substantial exposure to international traffic, are facing traffic reductions, revenue losses, cost escalation, and operational risks. Besides, the Airport operators also bear significant losses of Non-Aeronautical Revenue, which is lost forever, and there is no way to recover them," the letter, written earlier this week, said.

The association, whose members include GMR Group and Adani Group, has said that AERA should be directed to hike the landing and parking charges immediately after completion of the relief period, as well as true-up the under-recovery from the aggregate revenue requirement.

"The loss due to landing and parking can be compensated by an increase in UDF for international passengers in the same period. This will avoid true-up at a later stage," it said.

Airport operators are required to remit revenue share/per passenger fee to the Airports Authority of India (AAI) as per the respective concession agreements.

According to APAO, the ministry should direct AAI to defer such payments for an amount equal to the projected reduction in landing and parking charges, applicable for the relief period, without any interest or penalty.

A total of 14 airport operators, including those of Delhi, Bangalore, Cochin, Hyderabad and Mumbai, are members of the association.

Earlier this week, the Federation of Indian Airlines (FIA), which represents IndiGo, Air India and SpiceJet, told the government that the country's airline industry is under extreme stress and on the verge of "stopping operations", as they sought revision in jet fuel pricing and financial support.

The steep rise in jet fuel prices due to the West Asia conflict has pushed airlines' operational costs higher.

Meanwhile, APAO has also said that the ministry has to ensure that the benefit of reduced landing and parking charges is passed on by the airlines to passengers.

Follow PSU Watch on LinkedIN

"However, given that airlines operate in a largely unregulated pricing environment, there is no enforceable mechanism to ensure that reduced charges translate into lower airfares. Consequently, the intended public benefit may not fully materialise, while airports alone bear the entire financial burden," it noted.

Further, the association has suggested that the ministry ask state governments to reduce the value-added tax (VAT) on the jet fuel to 5 percent.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)