Passengers flying from Delhi’s Indira Gandhi International Airport (IGIA) may soon face higher airfares as airlines prepare to pass on increased operating costs. The airport’s operator, GMR Airports, has proposed a significant rise in the User Development Fee (UDF), prompting strong reactions from airline companies.
Airlines Urge Reconsideration
Several airlines, including IndiGo, Air India, and Akasa Air, have urged GMR Airports to reconsider the proposed UDF hike. UDF is levied by airports to generate revenue for infrastructure development and operational costs. Currently, domestic and international passengers pay a flat UDF of Rs 52. The proposed increase could push domestic UDF to Rs 610 and international UDF to Rs 1,620.
Potential Impact on Airfares
Industry experts believe this fee hike could lead to a 5-10 percent increase in airfares on select routes. India has already recorded one of the highest airfare hikes in the Asia-Pacific region since the pandemic. Airline officials argue that raising UDF will put additional financial strain on carriers, particularly during low-demand periods when airlines offer discounted fares to boost travel.
Stakeholder Consultations and Regulatory Review
The Airports Economic Regulatory Authority (AERA) conducted a consultation meeting with GMR Airports, airlines, and the International Air Transport Association (IATA) to discuss the tariff revision. AERA has requested written submissions from stakeholders before making a final decision. The regulator evaluates costs, depreciation, and expected returns when determining UDF revisions.
Business-Class Passengers to Face Higher Charges
GMR Airports is considering a tiered UDF model, where business-class passengers may face higher charges than economy travelers. Airline executives believe this will have minimal impact on business-class ticket sales, as premium travelers are less sensitive to price hikes. However, economy-class passengers, who form the majority, may bear the brunt of the increased costs.
Financial Challenges for DIAL
Delhi International Airport Limited (DIAL), which operates IGIA, has reported financial struggles. The airport has incurred significant losses, with fiscal deficits exceeding Rs 1,500 crore. To manage its growing debt and future capital expenditures, DIAL has requested AERA’s approval to raise aeronautical revenue per passenger.
Airfare Hikes Expected from April 2025
If approved, the new UDF rates will take effect from April 1, 2025. As airlines adjust to rising costs, passengers should prepare for potential increases in airfare, particularly on domestic routes.
