Airlines could face probe over surcharge

Airlines could face probe over surcharge
Comment E-mail Print Share
First Published: Sat, May 17 2008. 12 12 AM IST

Fighting back: SpiceJet has sought an investigation into uniform fuel pricing by oil companies.  (Rajeev Dabral / Mint)
Fighting back: SpiceJet has sought an investigation into uniform fuel pricing by oil companies. (Rajeev Dabral / Mint)
Updated: Sat, May 17 2008. 12 12 AM IST
Mumbai: Domestic airlines charging passengers the same fuel surcharge are likely to be investigated by the country’s antitrust overseer that feels it is unlikely that all carriers arrived at the same fee while operating in different business circumstances.
“The same fuel surcharge arouses suspicion of fixing prices. It is very unlikely that airlines arrived at the same amount though all have different costs,” said Augustine Peter, economic adviser at the Competition Commission of India.
The carriers, however, say that they are merely passing on to their customers the uniform price increases in jet fuel by state-owned oil retailers.
Fighting back: SpiceJet has sought an investigation into uniform fuel pricing by oil companies. (Rajeev Dabral / Mint)
Maintaining that there could be, on the face of it, evidence of price fixing, Peter said the regulator has not received any complaint from industry stakeholders on the fuel surcharge issue. “I cannot offer a comment on price-fixing issue at this point of time. But there is a potential issue for a serious investigation,” he said. Peter was speaking on the sidelines of a seminar on competition issues on Friday, organized by industry body Confederation of Indian Industry.
Domestic airlines are currently charging Rs2,350 per ticket on long-haul routes and Rs1,950 per ticket for short flights as fuel surcharge, which is paid in addition to basic fare, taxes and other charges.
The economic adviser also said the commission will look into the procedures for fixing prices of jet fuel. “There could be some difference in the prices if they are importing ATF (aircraft turbine fuel or jet fuel). But if it is an in-house product, there cannot be much difference,” Peter said.
UP, UP AND AWAY (Graphic)
India does not import jet fuel but refines it from imported crude oil. The oil companies, therefore, take into account a customs duty of 10% on crude while fixing the prices of jet fuel.
New Delhi-based budget airline SpiceJet Ltd’s executive chairman Siddhanta Sharma said he has requested the commission to investigate the uniform pricing by oil companies. “The fuel charges of the airlines would be same as the fuel price is the same.”
Peter said that the commission will certainly look at these issues if it gets a complaint.
“Prima facie, fixation of fuel surcharges warrant an investigation. There is no justification for the uniform fuel surcharge imposed by all airlines as each of them operates with aircraft of different fuel efficiency, flying into different routes with different class of passengers,” said Ajay Prakash, national general secretary of the Travel Agents Federation of India.
Aviation experts do not agree. Vasudevan Thulasidas, former chairman of the state-run National Aviation Co. of India Ltd, which operates Air India, said there is no cartelization or price fixation in determining either fuel surcharge or fares.
“The jet fuel price hike is the same for all airlines, so naturally the fuel surcharge is also the same. Notably, even this fuel surcharge is not fixed jointly. Airlines tend to follow one airline that is imposing surcharge first,” he said. “Cartelization is normal for fares, but one could see domestic carriers are competing in fares,” said Thulasidas, who was also the first president of the Federation of Indian Airlines, a lobbying body.
Peter said the commission was not yet in a position to take up enforcement functions under the Competition Act. “We are in the process of finding necessary members to start operations. I think the Commission will be fully functional in the next three-four months.” The commission now has only one member, and the Competition Appellate Tribunal mandated under the 2002 Act is not yet established.
Comment E-mail Print Share
First Published: Sat, May 17 2008. 12 12 AM IST