KOCHI: Cochin International Airport Ltd (CIAL), seems to have developed a strong appetite for the User Development Fee (UDF) or user fee, having introduced it for the first time in April 2022 – more than two decades after the airport began operations in 1999 – and now, in less than three years, has substantially hiked it.
The user fee for domestic passengers has risen by 33.3 per cent from Rs180 to Rs270, while international passengers now pay Rs570, up 42.5 per cent from Rs400. This steep increase in FY2025 (2024–25) is expected to further strengthen CIAL’s revenue stream, reinforcing its financial position and aiding in planned capital expenditures.
Of the total revenue of Rs951.10 crore CIAL earned for the financial year 2023-24, Rs190 crore has been contributed by user development fee or user fee. According to financial analysts, the user fee could easily cross Rs260 crore during the current financial year.
In fact, during FY24, while the total Aero revenue earned by CIAL was Rs620 crore, more than 30 per cent of it was contributed by the user fee thus becoming an integral part of CIAL’s revenue stream. The company’s share though not listed on any of the official stock markets yet, is traded in the range of Rs400 to Rs500 in the grey market.
Introduction of user fee
The introduction of UDF in 2022 marked a major revenue enhancement for CIAL, which had operated for nearly 23 years without such a levy. In FY2023, UDF collections contributed Rs114.59 crore to the company’s earnings.
This figure surged to Rs189.78 crore in FY2024, significantly boosting profitability. With UDF now accounting for nearly 46 per cent of CIAL’s net profit of Rs412.58 crore in FY2024, its role in supporting the airport’s financial health is evident.
With the latest hike, UDF revenues are set to rise further in FY2025. This increase, coupled with growing passenger traffic and higher aeronautical and non-aeronautical revenues, is expected to drive an estimated 10 per cent overall revenue growth in FY2025, according to experts.
Aeronautical revenues alone saw a 30 per cent jump in FY2024 to Rs638 crore, up from Rs493 crore in FY2023, aided by the UDF levy, increased tariffs, and an 18 per cent rise in passenger traffic.
A further 11 per cent increase is projected in FY2025, driven by continued traffic growth and tariff adjustments. Non-aeronautical revenues, including duty-free earnings, also grew by 17 per cent in FY2024 and are expected to rise by around 10 per cent in FY2025.
Capital expenditure and expansion plans
CIAL has outlined an ambitious capital expenditure plan of Rs1,000-1,200 crore for FY2025 – FY2026 to enhance its infrastructure, according to ICRA, the reputed rating agency. This investment will be funded through existing cash reserves, internal accruals, and, if necessary, additional debt.
The company currently maintains a strong financial position, with a low gearing ratio of 0.25 times as of March 31, 2024. As of December 31, 2024, CIAL held cash balances of Rs902 crore, which have been deployed in mutual funds and fixed deposits. This strong liquidity position supports its expansion plans without excessive reliance on debt.
Competition
Despite its strong financial position, CIAL faces stiff competition from four international airports within a 300 km radius – Trivandrum, Calicut, Coimbatore, and Kannur. “Any significant shift in traffic to these competing airports could impact earnings,” ICRA notes.
However, CIAL maintains a cost advantage, offering competitive rates despite the UDF increase. Its strategic location near major tourist destinations and Kerala’s primary business hub further strengthens its position.
