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Action against airlines that charge exorbitant fares: Patel

Action against airlines that charge exorbitant fares: Patel
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First Published: Thu, Nov 25 2010. 11 27 PM IST
Updated: Thu, Nov 25 2010. 11 27 PM IST
New Delhi: Civil aviation minister Praful Patel on Thursday threatened action against airlines that charge exorbitant fares, after several airlines raised ticket prices on the back of growing passenger traffic.
“We will take action against airlines that violate the price band. In fact, DGCA (directorate general of civil aviation) has sent notices to all the airlines. This kind of predatory pricing cannot be justified and it cannot be allowed to continue,” Patel said on the sidelines of an aviation seminar.
One-way economy class airfares on routes such as Delhi-Mumbai are being sold for as much as Rs16,000, while a one-way business class airfare on the same route can cost Rs35,000—matching the levels of return fares to some European destinations. The hike follows an 18-20% growth in passenger traffic this calendar year.
“We shall certainly try our best to bring discipline in the aviation sector. Airlines in the last few weeks have been charging very exorbitant prices,” the minister added.
It was not immediately clear the action the government can take.
DGCA has sent notices to airlines, asking them to explain the high fares.
In a recent circular, the regulator asked each airline to “furnish a copy of the route-wise tariff across its network in various fare categories, in the manner it is offered in the market, to DGCA on the first day of every calendar month”. Any “significant and noticeable change” in the filed tariff has to be reported to DGCA within 24 hours.
The new rules mean carriers have to specify minimum and maximum airfares across the sectors on which they fly and publish them on their websites.
Though airlines were forced to reduce fares on select routes such as Delhi-Dehradun this year, this is the first time the government has interfered in the pricing of air tickets on a national scale in recent years.
Civil aviation was liberalized in the mid 1990s, and airlines were allowed to price tickets as they wanted.
DGCA chief Nasim Zaidi, who is slated to take over as civil aviation secretary from 1 December, said the move was not meant to go back to regulated pricing.
“Isn’t there an MRP (maximum retail price) for every product?” he asked. “We are not going back to regulation. This is meant to bring in more transparency. Airlines CEOs (chief executive officers) have met us and asked for some more time to reply to us. Any major changes need to be reported to us.”
Samyukth Sridharan, chief commercial officer of budget airline SpiceJet Ltd, said airlines have sought more time and would reply to the notice by 1 December.
The mechanism of maximum and minimum pricing by full-service and low-cost carriers is still unclear, however. Airlines typically have been following in the past two years a model under which fares are cheap if tickets are booked up to a fortnight in advance, but become dearer as the flight date comes closer.
G.R. Gopinath, who founded the low-cost airline Air Deccan and later sold it to Kingfisher Airlines Ltd, said the government cannot control pricing as it has not made an effective policy in this regard.
“While the intentions of giving these moral lectures are good, I don’t think they can legally rein in airlines. To tackle this, the immediate step is to create sufficient capacity. Secondly, the government has to ensure a well-laid-out policy for the consumers, rather than policies for airports and private airlines, which it has focused on so far,” he said.
It can, for instance, give more power to the Competition Commission of India (CCI), Gopinath added.
“When they (airlines) went into losses, they started fixing base fares, while CCI was watching as a mute spectator. In other countries, you would go to jail.” he said. “What the government needs to do is to ask how to help the consumers? All other answers will follow automatically.”
tarun.s@livemint.com
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First Published: Thu, Nov 25 2010. 11 27 PM IST