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Background Airport One Ltd.

wished to levy user development fee (UDF) and development fee (DF) at several airports under its control to bridge revenue shortfall / funding gap for these projects. In this regard, Airport One Ltd. sought assistance in determining UDF and DF for respective airports, considering all relevant commercial aspects for these projects: revenues, expenses and capital investments.



To undertake the assignment, a team of experienced professionals with extensive background in tariff determination, infrastructure tariff policy, and airport operations was constituted.

This study involved two different types of fees to be determined for which different approaches were followed – Determination of User Development Fee (UDF) in those airport(s) where capital expenditure for airport development has already been done and Determination of Development Fee (DF) for those airport(s) where Airport One Ltd. is planning to invest and develop new infrastructure.

Activity Roadmap As a first step, the existing laws, policies and legislative decisions with respect to aviation industry in general and aviation tariff determination in particular, were collected and studied. One of the major policies that were studied in this phase was Airport Economic Authority of India’s (AERA) guideline for determination of UDF for several major airports. Information regarding the levying of UDF or any other similar charges by airport operators in India such as Bangalore, Hyderabad and Trivandrum airports were collected and analysed.

The next step of the assignment involved the study and understand the operation and various other financial aspects of Airport one. Data and information about the traffic, financial, commercial and operational activities pertaining to the airport(s) under study, which was received from Airport One, was verified thoroughly and were benchmarked.

Based on tariff determination guidelines and base financial data, comprehensive financial models were prepared for each airport project, which included forecasts for aeronautical as well as non-aeronautical revenues, expenses under various heads, the capital asset base, depreciation and tax etc. The User Development Fee (UDF) and Development Fee (DF) for the airport(s) were determined based on the above described financial analysis.

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