The airlines, in a meeting held on September 29, 2010 in Hyderabad with airport regulator Airports Economic Regulatory Authority (AERA), expressed concerns that the move may also encourage other airports to follow the suit.

AERA, in a consultation paper issued last month, had proposed to increase the UDF from Rs 340 to Rs 420 per departing domestic passengers and from Rs 907 to Rs 1,656 per departing international passenger for the airport on an ad-hoc basis as the Hyderabad International Airport has suffered losses in 2008- 09 and 2009-10. "While revised UDF rates may improve the viability of the airport, any increase may discourage air passengers that could eventually lead to drop in traffic growth," said Vinita Bhandari, Executive Director, Air India.

As per the minutes of the meeting, the Jet Airways representative said that airport operator should not insist on higher charges as the aviation industry is slowly picking up after a severe downturn. Lauding the infrastructure of the airport, representatives of Kingfisher Airlines, IndiGo and Federation of Indian Airlines (FIA) also echoed the view. They, however, felt that increase in UDF may lead to a dip in passenger traffic, affecting both the airlines and the airport.

FIA, in its submission, also added that while determining the benchmark rate for return on equity, the authority should take into consideration the fact that the airport operators get significant revenue from non-aero services where returns/margins are much higher. The proposed increase would earn the loss- making GHIAL an additional Rs 650 crore over the next three years and may enable it to turn profitable in this financial year itself.

GHIAL, which termed the UDF levied at present as inadequate, had earlier sought to increase the UDF fee from Rs 340 to Rs 500 per departing domestic passenger and from Rs 907 to Rs 2,825 per departing international passenger.