User fee at Adani’s Thiruvananthapuram airport up 50% from July 1

Thiruvananthapuram airport UDF and landing charges to increase significantly, sparking controversy over revenue projections and related party transactions.

Flying out of the Adani-controlled Thiruvananthapuram airport will get costlier from July 1 as the user development fee (UDF) levied on passengers as part of air tickets will go up by 50% from ₹506 to ₹770 for domestic travellers for a year and further raised every subsequent year. Landing charges for aircraft have been jacked up three-fold by the Airport Economic Regulatory Authority (AERA).

The revised levies are part of the tariff order issued by AERA on June 21 for a period of five years from April 1, 2022 to March 31, 2027, and will be effective from July 1, 2024. This is the first revision for the airport since its privatisation. The Thiruvananthapuram Kerala International Airport Ltd (TKIAL) is owned by Adani Airport Holdings Limited (AAHL), incorporated in 2019 as a 100% subsidiary of Adani Enterprises Limited, that controls eight airports. The authority determines tariff for an airport or a group of airports with passenger traffic of at least 35 lakh per annum every five years after considering the investment and expenditure incurred by the airport operator, and the tariff determination period varies from one airport to another.

In its order, the AERA said the applicable UDF for embarking domestic passengers from July 1, 2024 to March 31, 2025 will be ₹770 and ₹330 for disembarking passengers. From April 1, 2025 to March 31, 2026 domestic travellers on flights departing from the airport will have to pay ₹840, while those landing at the airport will have to pay ₹360. In the subsequent financial year, the fee for domestic travellers will be raised to ₹910 and ₹390 respectively. International passengers will have to pay twice the tariff levied on domestic travellers each year.

The landing charges for aircraft have been raised three-fold for the first year from ₹309 to ₹890 per metric tonne (MT) of aircraft weight. This will increase by 4.6 times and 5.5 times for the subsequent financial years with a levy of ₹1,400 per MT and ₹1,650 per MT. Parking charges have also seen an upward revision.

The regulator has rejected the airport’s projection for non-aeronautical revenue, such as from food and beverage and retail sales, that is used to cross-subsidise passenger costs and raised it four-fold to ₹392 crore as opposed to ₹102 crore proposed by the airport.

In a consultation paper in February, the AERA had said that while the norm at public-private partnership airports such as Delhi, Mumbai, Bengaluru, Hyderabad and Cochin was to have non-aero revenue at 50% of the total operation and management expenses, TKIAL’s estimate of ₹102 crore on non-aero revenue with O&M expenses of ₹1,752 crore was miniscule, or just 12% of the norm. It had said that this was against the interest of the airport users as 30% of the non-aero revenue is used for cross-subsidisation of aeronautical expenses. It had said that the sum of ₹102 crore was a third of what the Airports Authority of India (AAI) earned as non-aero revenue before privatisation and despite the effect of Covid-19 pandemic from 2016 to 2021.

In its June order, the AERA has also pulled up TKIAL for awarding the master concessionaire to its own holding company, Adani Airport Holding Limited, for F&B and retail services and said it “did not have direct experience of handling such services and may have to engage other experienced operators for the provision of different services,” adding that no advantage has been granted to the air travellers through cross-subsidisation. It had earlier remarked that the master concessionaire was selected through exaggerated bid criteria to exclude competition, such as a steep annual turnover of ₹750 crore.