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Collusion in air? Delhi-Mumbai budget airfare set at Rs5,400

Collusion in air? Delhi-Mumbai budget airfare set at Rs5,400
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First Published: Sat, Jun 21 2008. 12 48 AM IST

New Delhi: Starting next week, low-fare carriers SpiceJet, IndiGo and GoAir, that fly one in four air passengers in India, have fixed one-way airfares at around Rs5,400 between New Delhi and Mumbai, for the first time seemingly agreeing to common ticket prices on the busiest route in the country after three years of cut-throat price competition with each other.
But, India’s anti-trust regulator, responding to Mint’s queries about the increase, immediately said the common fares—nearly double what was being charged recently—could be a serious violation of the country’s competition rules.
“It seems very odd that they are announcing the same rate at the same time...if it has been done collusively then it is a serious violation of the Competition Act,” said Vinod Dhall, the outgoing acting chairman of the Competition Commission of India. The Commission, he noted, had already warned India’s airlines to refrain from making any collusive increases.
InterGlobe Aviation Pvt. Ltd-run Indigo and SpiceJet Ltd have told travel portals, such as MakeMytrip.com, that the base fare for New Delhi and Mumbai is being fixed at a minimum of Rs2,000, nearly double from earlier. That rate is topped off by levies related to oil prices and increased fuel use while flying over congested airports, and an airport use tax of Rs225 on each ticket.
While ticket prices change often, what makes this hike different is that the three airlines have all set the same airfares in the weeks through August, unlike the typical practice when such tickets start selling cheaply with prices rising closer to the travel dates.
According to a senior executive at Makemytrip (India) Pvt. Ltd, which runs India’s top travel portal by business concluded, the airlines have said they would like to test the waters on this lucrative sector and see if such a common increase will have a big impact on passengers.
“They have been under pressure not to increase fuel surcharges. Perhaps this will bring sanity into the market,” said Sanjeev Bhasin assistant vice-president at Makemytrip.
The Delhi-Mumbai sector is prime routing, accounting for half the country’s air traffic by passengers. Of the nearly 105 domestic commercial flights taking off from New Delhi each day, some 53 head to Mumbai.
SpiceJet’s chief executive Siddhant Sharma said the fares had been set for the “time being”. “The fares are what they are,” he said when asked if the Delh-Mumbai fares will now remain at a base fare of Rs2,000.
“We are still keeping fares lower than what the full service carriers are maintaining. These are the fares for the time being, we hope to break even on.” The airfares are likely to remain the same for the next two months unless there is some reduction in oil prices or government taxation, he added.
IndiGo chief executive Bruce Ashby was not available for comment. GoAir spokesperson and the airlines CEO Edgardo Badiali did not take calls despite repeated attempts.
Reji Philips proprietor of Mumbai-based Cosmos Agencies, which is International Air Transport Association (Iata) certified travel agent, said they have been caught unaware. “Earlier they use to inform us that fare will increase from 1st of June or 1st of July. Now without informing suddenly they have increased. This was an overnight decision. Fares for low-cost carriers are different by Rs500-1000, a customer who was promsied tickets in morning on a different rate had to be told he cannot get it on the same price any more in the evening. That’s why we have a lot of confusion.”
Another travel portal predicted that the move would be copied soon by other airlines. “It’s a very competitive environment so basically when one airline makes changes the other tends to follow pretty quickly,” said Ankur Agrawal, vice-president (technology) of TravelGuru.com, run by Mumbai-based DV Travels Guru (Pvt.) Ltd.
Separately, Kingfisher Airlines Ltd and Deccan Aviation Ltd, which are merging, said Friday that they too will follow Jet Airways (India) Ltd’s example of setting a minimum base fares of Rs1,000 for distances up to 750km, Rs2,250 for flights between 751km and 1,000km, and Rs3,000 for distances above 1,000 km.
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First Published: Sat, Jun 21 2008. 12 48 AM IST