User fee a must, says new Bangalore airport operator

March 9th, 2008 - 1:31 pm ICT by admin  

By Fakir Balaji
Bangalore, March 9 (IANS) Promoters of the new Bangalore international airport on the outskirts of India’s silicon hub have ruled out waiving the user development fee (UDF) on passengers, saying it is needed to generate revenue to operate and maintain a world-class airport. The Rs.25-billion greenfield project at Devanhalli, about 37 km from the city, is nearing completion and commercial operations are set to begin March 30.

“The UDF is meant to mobilise additional revenue to operate and maintain a world-class airport and invest in the expansion phase to serve 12-15 million passengers annually over the next five years,” Bangalore International Airport Ltd (BIAL) CEO Albert Brunner told IANS.

As per the concession agreement (CA) signed by the BIAL consortium with the union civil aviation ministry in June 2004, the operator is allowed to levy UDF on domestic as well as international passengers embarking from the new airport to be called Bengaluru International Airport.

“Though waiving UDF is a zero option for us, we have decided to reduce it for the first two months (April and May) to mitigate hardship for passengers during transition from the existing airport to the new one. We are flexible and open to considering the fee rate to protect passenger interest and yet ensure the project’s viability,” Brunner said.

As a gesture, BIAL has reduced UDF from Rs.675 to Rs.240 plus taxes (12.36 percent) for domestic fliers till May 31. The new rate for international passengers is Rs.520 plus taxes against the earlier Rs.955 . From June 1, the consortium intends to charge higher rates after clearance from the ministry.

UDF will be in addition to the passenger service fee (PSF) of Rs.225, levied by the Airports Authority of India (AAI) on passengers embarking from the city airport.

“As our share from PSF will be only Rs.70, with the balance amount (Rs.155) divided between AAI for access and CISF (Central Industrial Security Force) for providing security, it will be difficult for us to provide and maintain higher infrastructure quality and safety.

“Without UDF, we will not be able to provide additional amenities and raise capital from banks and institutional investors to fund the next phase. The project cost has shot up by Rs.11 billion from the revised estimate of Rs.14 billion after we were directed by the ministry to increase the terminal capacity to handle 10 to 12 million passengers per annum from the first year of operations, as against 8 to 10 million passengers envisaged in the initial phase,” Brunner said.

The consortium proposes to levy UDF for five years and the rate will be fixed every year in consultation with the civil aviation regulatory authority to be set up by the ministry soon. The entire fee will be invested in the maintenance and expansion of the airport and enable BIAL to break even early.

Brunner likened UDF to the toll levied on national and state highways by government and private operators to recover the cost incurred in building roads.

When the International Air Transport Association (IATA) objected to the different fee structure for domestic and international passengers, BIAL defended it citing the affordability factor.

“We have explained to IATA that a uniform fee will be a burden on domestic fliers as they already bear the brunt of higher aviation turbine fuel (ATF) charges, levied as surcharge on basic fare by all airlines, including low-cost carriers. With higher disposable incomes or organisations paying up, international passengers are in a better position to afford higher fee,” Brunner said.

Demand for waiving UDF on domestic passengers departing from the new Bangalore airport intensified after GMR Hyderabad International Airport Ltd (GHIAL) decided not to levy the same on domestic fliers to minimise the burden of air travel. The fee for international fliers has been retained at Rs.1,000. The GHIAL began operations a few weeks ago.

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