Covid-squeezed Indian airlines may now charge you more

Passengers flying out of Mumbai may have to pay a user development fee to cover for lower aviation revenues due to the Covid-induced travel disruptions

Covid-squeezed Indian airlines may now charge you more
Chhatrapati Shivaji Maharaj International Airport at Mumbai. Image courtesy: CSMIA website

Until the start of 2020, India’s aviation industry was on a rapid ascent and then the Covid-19 pandemic hit. And the fear, driven by the tectonic shifts that the pandemic brought with it, impacted travel behaviour severely. The aviation industry is still reeling from the two-month flight ban that the government of India imposed during the Covid-induced lockdown.

But now, the aviation industry might levy a user development fee (UDF) for both domestic and international passengers flying out of Mumbai. The Mumbai International Airport Limited (MIAL) has proposed to levy a UDF of Rs 200 for domestic outbound passengers and Rs 500 for international outbound passengers till March 31, 2023.

Cash shortfall

Citing a cash shortfall for meeting operational expenses, MIAL told the Airports Economic Regulatory Authority (AERA) that the UDF will ensure economic and viable operations for the Chhatrapati Shivaji Maharaj International Airport that has been struggling due to low air traffic as a result of the coronavirus crisis.

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While the UDF proposed for domestic flights from Mumbai is Rs 200, international flyers would have to shell out Rs 500 over the already levied UDF of Rs 116. For international tickets issued in foreign currency, the UDF proposed is $7.23 in addition to UDF of $1.68, taking the total to $8.91.

Airline regulator Directorate General of Civil Aviation (DGCA) would take a final call on whether the ad hoc UDF should be levied and how much.

Drying airport revenues

Airports from those in Delhi, Mumbai and Hyderabad to those in Bengaluru, Kochi, Ahmedabad and Lucknow are facing revenue shortages due to Covid-19. While the operational cost has increased due to increased sanitisation measures, other airports too, especially the public-private partnership (PPP) ones, may also seek a similar ad hoc levy like MIAL.

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Airports Authority of India (AAI) chairman Arvind Singh had earlier this month said that the public sector undertaking's “revenue was down by 80% in April-June, 2020 quarter over the same period last fiscal.”

On the proposed UDF levy, MIAL CEO RK Jain, in a letter to AERA, on October 15, 2020 said, “If (this) payment is made within 15 days from receipt of bills, collection charge of Rs 2.5 per departing passenger shall be paid by (MIAL) to collecting airline. No collection charge in case to be paid if airline fails to pay within 15 days or in case of part payment. To be eligible to claim collection charges, the airline should have no overdue on any account with the airport operator.”

Eligibility for UDF collection

The Mumbai airport also proposed that the airlines would only be eligible for UDF collection if they give passenger data in a certain timeframe. A delay in it could bring about a penalty of Rs 10,000 on the airlines.

The letter adds: “(This)... annual tariff plan (is) proposed to be effective from January 1, 2021 till March 31, 2024.... (on) September 14, 2020, we had brought out the necessity of permitting ad hoc UDF upto March 31, 2023 in order to ensure economic and viable operations of airport... Due to Covid-19, there is disruption in passenger traffic, (aircraft movement) resulting into severe adverse impact on aero and non-aero revenue. There is cash shortfall for meeting operational expenses, which needs to be bridged partially through collection of ad hoc UDF as proposed by MIAL,” the letter says.

Earlier in March, the Association of Private Airport Operators (APAO) sought to levy a corona surcharge called “a nominal passenger facilitation charge” to cover for the lower revenues of the airlines.

While the airlines do not expect to see air traffic returning to normal before 2023 or 2024, the long revenue drought is a challenge for them, with almost all Indian carriers struggling to survive.