Business Today

Airlines cartel told to lift fog on fares

Private airlines push for 'market forces' and 'liberalisation' after the government rapped them on the knuckles for hiking fares to exorbitant levels over the past few weeks.

Sanjay Singh | December 7, 2010 | Updated 13:58 IST

Private airlines have suddenly started talking of "market forces" and " liberalisation" after the government rapped them on the knuckles for hiking fares to exorbitant levels over the past few weeks.

The excuse of market forces and liberalisation came despite the same airlines rushing to the government for a bailout - and receiving it - during a post- recession recovery period last year.

Top officials of the civil aviation ministry and the aviation regulator, the Directorate General of Civil Aviation (DGCA), on Monday summoned the CEOs of leading full- service carriers - Air India, Jet Airways and Kingfisher Airlines - to read them the riot act.

The DGCA had last Saturday met officials of the no- frill carriers - IndiGo, Spicejet and GoAir - after issuing a directive asking all airlines to explain the high fares they were charging. The DGCA issued a fresh directive shortly after the meeting, ordering airlines to publish their fares in a transparent manner.

Airlines have been asked to show route- wise and datewise airfares on their websites by Wednesday evening and ensure transparency so that flyers do not feel cheated by high ticket prices.

A senior ministry official said all airlines have agreed to comply with the directive that has to be implemented latest by 5 pm on December 8. Kingfisher Airlines promoter Vijay Mallya on Monday protested government's efforts to reduce high fares charged by airlines. He said airfares should not be capped by the regulatory authorities, whether "high or low".

"There is no case of capping airfare in a liberalised environment, be it at an upper or a lower band. It is a function of demand and supply. It is not exploitation by the airlines. Airlines are fighting for marketshare, so demand and supply has to be respected," Mallya said on the sidelines of a conference organised by Ficci.

Mallya's complaint would seem logical, if it were not for his - and other carriers' - track record of lobbying the government for a string of concessions and bailouts in the past.

Apart from Air India, which has approached its owner, the government, for funds to restructure, private Indian carriers have enjoyed concessions, tax rebates, extended credit on fuel purchased from state-owned fuel companies and cuts on airport charges, besides other benefits as part of the government's post-recession bail-out plan since last year.

But as normalcy returned, airlines sought to cash in on the holiday season rush, when most travelers are committed to travel, by suddenly and inordinately hiking airfares from November 15, particularly on the metro routes.

The DGCA had then issued a directive on November 19 asking airlines to furnish a copy of established tariffs route-wise across their network in various fare categories to the DGCA on the first day of every calendar month.

The DGCA directive also states that the airlines would have to not only provide details of routewise fares but also detail them for each "fare bucket". Aircraft seats are grouped into different categories, each at a distinct price. These categories are referred to as "fare buckets".

Airlines have been notorious for selling a limited number of seats in each flight at low fares, which are heavily advertised. As soon as these seats are filled, the fares mount exponentially, closer to the date of travel.

Many major carriers across the world file their bucket seat prices to the Washington-based Airlines Tariff Publishing Company, which then gives out the information to international booking and distribution systems like Amadeus, Sabre and Travelport, maintaining strict confidentiality.

Post-Diwali, the last-minute or spot tickets airfares had skyrocketed. Two weeks ago, the lowest fare for the last-minute tickets booked at Delhi-Mumbai route was over `17,000, even though the holiday travel season had not begun.

The airlines have been accused by consumer bodies of cartelisation, a charge upheld by even civil aviation minister Praful Patel. In fact, there is little difference in the fares charged by low cost and full service carriers. Last week, Patel accused airlines of cartelisation and asked the competition body, Competition Commission of India (CCI) to investigate them.

Patel had also rejected the proposal by domestic airlines for a massive fare hike and warned them of penalty and other action if the last-minute ticket prices were higher than average ahead of the high-demand Christmas-New Year break.

The minister also asserted that the government can't remain a mute spectator to the move by the air carriers and said there can be no justification for airlines to hike fares in an arbitrary manner. "We do not want that to be repeated during Christmas," Patel had said rejecting the distancebased fare slabs proposed by all Indian airlines.

Courtesy: Mail Today 

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