New Delhi/Mumbai: On a day the country’s fair trade regulator joined another government agency to probe the latest round of fare increases by India’s eight national airline firms over the weekend for alleged collusive pricing, a Mint compilation shows that most firms have changed air ticket prices at least a dozen times in tandem in the last two years.
On 2 June, India’s leading so-called full-service airline firms, Jet Airways (India) Ltd, Kingfisher Airlines Ltd and state-owned National Aviation Co. of India Ltd (Nacil), raised ticket prices by between Rs300 and Rs550 each. Two days later, SpiceJet Ltd and InterGlobe Aviation Pvt. Ltd-run IndiGo followed suit, increasing their ticket prices by exactly the same amount.
In August, Jet Airways, Kingfisher Airlines and Nacil-run Air India, raised their prices by up to 10% of the base fare on their tickets. Base fare, fuel surcharge, the now-removed airport congestion fee, an airport usage fee and taxes make up for the price of a ticket.
In 2007, ticket price hikes made in July, August, October, November and December were in tandem across most airlines.
On Friday, members of the Federation of Indian Airlines (FIA), a lobby group represented by Jet Airways CEO Wolfgang Prock-Schaeur, SpiceJet managing director Sanjay Aggarwal, Kingfisher’s vice-president (global sales) Siva Ramachandran, IndiGo president Aditya Ghosh and others were among those who met at Air India’s New Delhi office.
The need for the latest fare hike, which comes despite easing jet fuel prices, was evident as late as end-January as airline revenues continued to plunge on the back of ticket auctions at up to 50% discounts through the month.
The sharp drop in yields prompted a top executive at a low-cost airline to suggest to his peers that airfares be hiked since nobody was gaining from such a fare war.
“Last week (of January), I proposed to raise fares,” this executive told Mint, asking he not be identified. Fares were as low as Rs1,960, inclusive of surcharges, taxes and airport fees, for a Mumbai-Delhi flight, resulting in halving of yields (gross revenue per ticket) from early December.
On 23 January, describing the low-fare regime and fare wars as a “free for all”, FIA circulated a letter asking for a review as its member-airlines were readying a proposal for a support package from the government, including a $2 billion (Rs9,740 crore) airline stabilization fund.
“FIA also wishes to know from its members that whether in this given situation of free for all (fare war) in the Indian airline industry, would it be prudent for FIA to send this draft to the government seeking relief/support for the airline industry in India,” an industry executive read out the letter to Mint. Two other executives, who had reviewed the letter, confirmed the contents. All the three executives did not want to be identified.
In October, when the airlines had approached the civil aviation ministry for a bailout package, they were told to rationalize over-capacity in airline seats and pricing.
Airlines denied there was any cartel at work. Late on Wednesday night, Kingfisher Airlines said in a statement, “When every airline is fighting for a share of a declining pie, there is no question of cartelization. On the contrary, LCCs are still offering fares starting from Re1.” LCC is short for low-cost carriers. The “government must decide if aviation is an important instrument in economic and social growth and if so, help the industry where thousands of jobs and semi-urban connectivity are at stake”, it concluded.
On Thursday, the Directorate General of Civil Aviation (DGCA), which is probing the latest fare hikes, remained stern. “The DGCA was not aware of the reasons for this simultaneous hike, specifically at a time when the ATF prices, effective 1st February 2009, are at the level that they were in 2005,” it said in a statement.