The Indian aviation regulator is acting like a football referee who has given up the whistle to join the game.
The Directorate General of Civil Aviation( DGCA) is responsible for the safety of the planes that take off from Indian airports. Instead, it has been busy dabbling in the pricing of airline tickets. Such unwarranted regulatory overreach comes at a time when airline companies are already facing problems ranging from infrastructure woes to tattered finances.
On 11 January, India’s second largest low-fare carrier, SpiceJet, said it was offering one million seats at an all-inclusive fare of Rs.2,013 a ticket, for any domestic flight from 1 February to 30 April, as long as the tickets were booked by 13 January. The steep discount forced its rivals—IndiGo and GoAir—to follow suit.
Consumers were not complaining. SpiceJet sold 170,000 seats till 5pm on 11 January itself, against an average 40,000 seats a day. But, after a warning from DGCA, all three airlines rolled back the discount sale by the evening, even as millions flocked to their websites.
DGCA said the discounting would lead to further losses for aviation companies. Indian airlines lost a combined $2.5 billion in the last fiscal year, according to estimates.
This is not the first time DGCA has got involved in ticket pricing. In June 2012, it had asked Indian airlines to lower fares by 5-20% in their highest categories, when economy class airfares had increased by 40% and business class fares by 20% in the first six months of 2012. The regulator argued that jet fuel prices had gone up by a relatively modest 16% during that period, while fares shot up by 40%.
In the past, DGCA has also told airlines to stop charging additional fees from passengers who want to book preferred seats in advance—in the front of the aircraft or in the emergency rows that offer better legroom.
Such regulatory interventions make little sense in what is supposedly a deregulated market.
What’s more, DGCA does not have adequate staffing to do its main job. A total of 528 DGCA posts are vacant, of a sanctioned strength of 924, minister of state for civil aviation K.C. Venugopal told the Rajya Sabha in December.
One cannot imagine Federal Aviation Administration of the US calling American airlines to ask them to charge more or less for tickets.
If there is a fear of cartelization, then India has an authority to deal with the problem—the Competition Commission of India.
DGCA should stick to what it is supposed to do. Its job is to protect passenger safety and not decide ticket pricing.