Adani proposes new User Development Fee for domestic flyers at Mumbai airport

In a move that is not expected to go down well with flyers, Adani Airports has proposed the introduction of a User Development Fee (UDF) of Rs 325 for domestic passengers at the Chhatrapati Shivaji Maharaj International Airport (CSMIA) in Mumbai. For international passengers, it has proposed an increase in UDF from Rs 187 to Rs 650 per passenger.

UDF is a fee levied by airport operators to compensate for revenue shortfalls and varies across airports. The final fee structure will be determined and approved by the Airports Economic Regulatory Authority of India (AERA) following a consultation process.

Earlier this month, GMR Airports-operated Delhi Airport also proposed a hike in UDF, citing financial losses and mounting debt as reasons for the move. DIAL, which manages the Indira Gandhi International Airport, proposed charging departing passengers Rs 405 during off-peak hours and Rs 610 during peak hours between April 2025 and March 2026. Arriving passengers are expected to pay Rs 140 in off-peak hours and Rs 210 in peak hours.

For international flights, the proposed UDF by GMR Airports is Rs 810 for departing economy-class passengers and Rs 1,620 for business class. Arriving international passengers would be charged Rs 280 for economy class and Rs 570 for business class. The proposal justifies the fee hike by citing operational losses of Rs 1,795 crores from FY21 to FY24 and an expected loss of Rs 1,794 crores in FY25.

GMR Airport’s debt has surged to Rs 14,786 crores as of 31 March 2024, leading to a negative net worth projection by March 2025. The company also noted that a declining credit rating could hinder future fundraising efforts.

In January this year, the Public Accounts Committee (PAC) of Parliament criticized the "arbitrary" UDF charged by several airport operators. It directed AERA to provide a detailed explanation within 15 days on the criteria for calculating UDF, the total revenue earned, and the corresponding improvements made in passenger amenities and infrastructure.

The committee also expressed dissatisfaction with the Directorate General of Civil Aviation (DGCA) for lax tariff regulation.

Adani Airport Holdings Limited (AAHL), a subsidiary of Adani Enterprises, manages seven airports in India, including Mumbai, Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati, and Thiruvananthapuram.

Additionally, the group is overseeing the development of the Navi Mumbai International Airport (NMIAL), a major greenfield project estimated to cost Rs 16,700 crore.

Adani Group chairman Gautam Adani recently announced that the inauguration of the Navi Mumbai International Airport, initially scheduled for 17 April 2025, has been postponed to June 2025. The new airport is expected to ease congestion at the existing Mumbai airport and accommodate the growing passenger volume.

NMIAL is being developed through a joint venture between AAHL (74 per cent) and the City and Industrial Development Corporation of Maharashtra (CIDCO) (26 per cent).

The proposed fee hikes at Mumbai and Delhi airports comes in the wake of airport operators' own financial challenges amid increasing passenger traffic, infrastructural demands and new airports coming up. However, the final tariffs will depend on AERA's approval following the mandated consultation process.