Days before the Airports Economic Regulatory Authority (AERA) is expected to announce the new aeronautical tariffs, which includes landing, parking, housing charges and user development fee (UDF), the Bangalore International Airport Limited (BIAL) on Wednesday said that a reduction in the UDF may not translate into reduced fares for passengers.
Passengers and activists have been calling for reducing or doing away with the UDF arguing that BIAL has been collecting the fee in excess for 27 months. The tariffs were supposed to be revised in 2016.
Hari Marar, Managing Director and CEO, BIAL, said, “Air fares follow dynamic pricing model, and are based on demand and supply. Even if the AERA reduces the UDF, it may not reflect in ticket prices.”
Drastically reduced tariff can impact projects
BIAL said that if the tariff is reduced drastically, the infrastructure development projects inside KIA are likely to suffer. The AERA had proposed a reduced UDF of ₹316.8 for international departure passengers and ₹79.2 for domestic departure passengers.
Currently, BIAL charges UDF of ₹1,537.08 for international departure passengers and ₹384.27 from domestic departure passengers.
“The 'excess money' we are getting now is being used to fund expansion of the airport. AERA has fixed a certain rate of profit for BIAL, and anything we get in excess due to increased passenger traffic is adjusted in the subsequent control pricing period by the regulatory body. There is no question of BIAL making extra profit. But, if the tariff is reduced considerably now to compensate for the excess inflow of money, the expansion will be affected,” Mr. Marar said.
He added that a reduction will also lead to a tremendous spike in tariff when the price is revised in 2022, as the new infrastructure being built at a cost ₹12,000 crore would have been capitalised and BIAL would be spending on maintaining the newly added assets. This cost will be added to the aggregated revenue requirement of BIAL, which determines the tariff.
Instead, BIAL wants AERA to continue the current tariff till the next pricing period.
Alternative connectivity on shaky ground
Making a case for a third entry point to KIA through a 2.67 km-long tunnel at a cost of over ₹1,200 crore, BIAL said the project had been taken up with a long-term vision of transporting domestic passengers from the airport to the city.
Hari Marar, Managing Director and CEO, BIAL, said, “The passenger traffic to KIA is likely to touch 80 million by 2029. Most travellers are domestic passengers (86%). Given this, alternative connectivity to the city is essential. Right now, all the traffic to and from the airport lands up at Hebbal flyover. Going by the airport traffic growth, the availability of only one entry and exit route will lead to a disaster.”
According to BIAL, a tunnel running underneath the second terminal’s apron could provide direct connectivity to the airport for people from HSR Layout, Whitefield and other areas.
“Around 40% of the traffic can be diverted from Hebbal once the new road opens. An airport of this size can't operate with just one road,” he said.
The project, however, is about to be killed, he said. “AERA is worried about the outcry in Bengaluru against the project. We are about to lose this important connectivity option forever. Once work on Terminal 2 is completed, we won’t be able to build the tunnel,” Mr. Marar said.
