Delhi and Mumbai airport abolish ADF, are cheap flights on anvil?

The news which caught the attention of newspaper readers this morning was the abolition of the airport development fee (ADF) being charged from the customers flying from Mumbai and Delhi. It shall be recalled that the exponential hike in the ADF was severely criticized by the airlines, customers and even IATA. This levy made the other cheap flights out of these two cities very expensive as compared with the other airports within and outside of the country. The charges were justified by the airport developers who argued that the recovery of revenue within the stipulate time period would be possible only in these rates. Due to the high ADF, some low cost carriers such as Indigo stopped using the newly built Terminal 3 for its flights.

However, the recent news of the abolition of these charges is welcome news for the stakeholders including the airlines and the customers since there will be reprieve from high charges of air tickets which were being charged ultimately from the customers. Many critics believe that this reprieve might be temporary since the airport developers might have to raise revenues through other means such as equity or debt, both of which have their own costs of financing.

The rationale for the abolition of the ADF lies in the CAG report which pointed out that there was no provision for levying of the ADF in the original draft agreement between GMR and Delhi airport authorities. Despite the non-existence of this provision, DIAL was allowed to levy ADF. CAG noted that this was against the terms and conditions of the agreement. However, this move is expected to set the process right but for the customers the reprieve might be very little and is likely to last for about two months.