The Airport Economic Regulatory Authority (AERA) has approved an over 50 per cent increase in user development fees at Thiruvananthapuram airport.

The airport sector regulator has also advised the Adani-group-run airport to minimise related party transactions and safeguard the interests of all stakeholders for the optimisation of aeronautical charges.

According to the tariff order released last week, domestic and international passengers will now have to shell out ₹770 and ₹1,540 (excluding taxes) in user development fees (UDF) till March 2025. The levy will increase in FY26 and FY27.

Similarly, UDF is being introduced for arriving passengers, and those coming from domestic and international destinations will pay ₹330 and ₹660, respectively in the current fiscal. The UDF approved by the regulator however is lower than the hike sought by the airport.

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Aircraft landing charges on domestic airlines, too, have been hiked by upto three times. Parking charges too have been revised, and a fuel infrastructure levy has been introduced as a hydrant system is being proposed at the airport for dispensing fuel to aircraft.

RELATED-PARTY TRANSACTION CONCERNS

While revising the charges, AERA has also advised the airport operator to minimise related party transactions and ensure fairness and transparency in such intra-group deals.

It has also directed that related parties engaged in a particular service possess the requisite expertise in carrying out similar business at other airports. Further, the airport has been asked to safeguard the interests of all stakeholders while entering into related-party deals.

Related party transactions at Adani Group-owned airports, especially those related to non-aeronautical business, have faced objections from airlines.

For instance, Thiruvananthapuram airport has outsourced all its non-aero business (duty-free, retail, lounges, advertising, etc.) to Adani Airport Holdings Ltd. via a master services agreement.

The International Air Transport Association observed that Thiruvananthapuram airport projected 65 per cent lower non-aerial revenue compared to previous years when it was under the control of the Airport Authority of India.

Concerns were also raised about restrictive criteria for bids and the revenue sharing arrangement between the airport and Adani Airport Holdings Limited (AAHL).

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As per the prevailing tariff calculation method, 30 per cent non aeronautical revenue of an airport is used to cross subsidise aeronautical charges such as UDF or landing fees. While the airport proposed revenue earned under the master services agreement be used for offset, IATA argued that entire non aeronautical revenue be taken into consideration and not just fees or share of revenue paid by AAHL.

As in the case with other group-run airports such as Lucknow or Ahmedabad, AERA rejected the airport operator's non-aeronautical revenue estimates in the tariff order.

The regulator has considered non-aeronautical revenue for FY19 as a base for calculating tariffs, and the same is higher than the amount projected by the airport.

The Adani group, however, has opposed AERA’s stance, and previously, the Adani group’s airports have appealed against tariff orders in an appellate tribunal.

“There is no provision in AERA guidelines for a notional increase in non-aeronautical revenue while determining tariffs,” Thiruvananthapuram airport argued. It said the bid criteria were designed to achieve the highest standards of service and fiscal responsibility.

“As long as there is no procedural irregularity, the outcome of an open competitive process cannot be altered to achieve a particular requirement,” the airport added.

The Adani group did not respond to an email query on the topic.

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