HIKE IN UDF - UNFAIR TO HIKE FARES
By Ruma Dubey
You first build a palatial home which is beyond your means; super luxurious and super expensive. Why do you do that? Because you are rising in life – materially and socially and you want to show that you are actually much beyond what you are worth. Thus in this bid to ‘show off’ you run debts and costs which are today spiraling out of control and threatens the very existence of your home – your family and your so called ‘image’.
This in a nutshell is the story of Mumbai and Delhi airports today. In a country where we do not have decent roads and even basic infrastructure like power and water, we go ahead and build a super duper luxurious airport in Delhi and Mumbai.
As such existing airlines are finding it tough to survive and now both these airports are planning to hike various airport charges to meet their expenses. DIAL had demanded a 774% hike in User Development Fee (UDF) as Delhi International Airport (DIAL) is unable to meet its costs. And the Airports Economic Regulatory Authority this week approved a 346% UDF hike, effective 15th May for the next two years. This when translated in rupee terms, means domestic passenger will have to pay Rs.195.80 to Rs.391.60 which will go up to Rs.207.32-414.65 next year. International passengers arriving at Delhi airport will have to pay Rs.436 to Rs.881 depending on the distance flown and next year, this will go up to Rs.461-Rs.932. And this is over and above the airport development fee charged by DIAL.
Apart from the need to recoup its losses and help breakeven, GMR has justified this hike by stating that these rates have been stagnant from 2009 and more importantly, it needs to part with its revenue to AAI and is thus not able to sustain. The government gets around 46% of the revenues from the UDF charges at DIAL and 39% from UDF revenues from Mumbai International Airport (MIAL). AAI’s revenue at the Delhi and Mumbai airports has increased by around 100% in last five years. It received Rs.582 crore from DIAL and Rs.464 crore from MIAL in FY11.
Encouraged by DIAL, MIAL too now wants to hike its UDF and it has demanded a 500% hike in its UDF from AERA. Obviously, this is over and above the airport development fee of Rs.100 for domestic travelers and Rs.600 for international flyers, which will come into effect from May 1. Thus a person landing in Delhi, for no fault of his will now have to pay around Rs.1100 extra. And once MIAL also gets the nod, airfare from Delhi to Mumbai will go up by 1600 to Rs.2000, over and above the existing fare.
Delhi airport known as Indira Gandhi International Airport is owned by a consortium – GMR owns 54%, AAI holds 26%, Malaysia Airport Holding has a 10% stake and Fraport holds 10%. DIAL incurs a loss of Rs.50 core a month and GMR, for FY11, posted a net loss of Rs.450 crore and in Q3FY12, its net loss was at Rs.229 crore. It is largely expected by the market that it will end current fiscal too in the red. The MIAL is owned again by a consortium wherein GVK holds 50.5%, AAI like in Delhi, holds 26% stake, BSD (Mauritius) holds 13.5% and ACSA Global holds 10%.
The fallout of all these hikes? First and foremost, passenger fares will get hiked further and this travel will take a beating. At a time when airlines need to increase air passenger traffic it might be forced to cut it due to fare hikes. Building mammoth airports and then passing all the burden of running it onto the passenger is just unfair. DIAL is making losses as it is underutilized. The fallout of every inefficiency is the common man; every burden is passed on to him. Another major fallout is that many airlines are sure to protest and budget airlines might drop Mumbai and Delhi. In 29th March, Malaysian budget carrier AirAsia suspended services to Delhi and Mumbai, citing, among other things, airport and handling costs at both international airports. Budget airlines just cannot operate under such costs. So once again who loses? Me and you.
It is too late to question whether we needed such a swanky airport in the first place. We needed to upgrade but the cost does not seem to be worth it today. The Govt needs to rethink about its revenue sharing terms and probably scale down its revenue sharing or else, it could kill the very goose which laid the golden egg.