From April 2022, flying to become a tad pricier

AERA allows BIAL to increase user development fee for a period of 4 years

Come April 2022, air passengers flying out from Kempegowda International Airport (KIA) will have to shell out more on flight tickets. The Airports Economic Regulatory Authority (AERA) has allowed the Bangalore International Airport Ltd (BIAL) to increase the user development fee (UDF) for a period of four years till March 2026 (termed as third control period). In a relief, there will be no change in the UDF charges in this financial year.

The AERA’s order issued last week brings to an end several months of deliberation with various stakeholders.

Early this year, the BIAL had proposed an increase of UDF on the domestic departing passenger from the current Rs 217 to first Rs 450, then Rs 550 and finally Rs 555. Similarly, the hike proposed for international passengers was from the current Rs 839 to Rs 1,350, then Rs 1650 and finally Rs 2,220.

The airport operator — which has undertaken expansion projects amounting to Rs 13,000 crore, cited significant fall in air travel demand, economic slowdown caused due to lockdowns etc to back its proposal for an increase in the UDF tariff. On its part, the regulatory authority – established to look into the interest of all the stakeholders while determining the tariff of the Airport – has trimmed BIAL’s infrastructure proposals, deferred a few projects before arriving at the final UDF charges.

The AERA approved charges are: a UDF of Rs 350 will be charged on the embarking domestic passenger in the next financial year. It will increase to Rs 450 in 2023-24 and Rs 550 in 2024-25.

The charges will remain the same till December 2025 before its reduced to Rs 385 for the first three months of 2026. Similarly, the international passengers will pay UDF of Rs 1,200 in 2022-23, Rs 1,400 in 2023-24, Rs 1,500 from April 2024 to December 2025. The charges will be reduced to 1,050 between January and March, 2026.

It’s however not clear how much additional revenue the higher UDF can mop up for the BIAL. The airport operator, in its submissions to the AERA, had projected 18 million domestic passengers and 2.36 million international passengers in the next financial year. The passenger growth is expected to double by 2026.

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BIAL disappointed

“For the past 11 years, BIAL has reinvested its earnings to fund this capacity enhancement, hoping to provide strong earnings to the shareholders once this project is completed. It is therefore very disappointing to receive a tariff order which is likely to be seriously inadequate to meet our cash flow requirements and will also pose a challenge when it comes to meeting operational expenses,” a BIAL spokesperson said. “This is further exacerbated by the fact that during the period of the recovery of this investment, traffic is at its lowest as a result of the ongoing pandemic.”

The BIAL was not happy with AERA postponing recovery of Rs 1,100 crore of the Aggregate Revenue Requirement (ARR) to the fourth control period, which begins from April 2026.

“This is likely to delay the shareholder returns during the control period, causing nervousness and adversely impacting investor sentiments towards the aviation sector that is seriously impacted by the pandemic,” the official statement said.

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