Competition Commission starts investigating identical airfare pricing | Mint
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Business News/ Companies / News/  Competition Commission starts investigating identical airfare pricing

Competition Commission starts investigating identical airfare pricing

Commission seeks details on the way all domestic airlines price fares, suspecting they are behaving like a cartel

CCI has asked airlines to provide details on four routes. Photo: Ramesh Pathania/MintPremium
CCI has asked airlines to provide details on four routes. Photo: Ramesh Pathania/Mint

New Delhi: The Competition Commission of India (CCI), the nation’s antitrust watchdog, has started an investigation into airfare pricing after finding that airlines were selling seats at nearly identical prices that offered little choice to travellers.

CCI has sent a letter to all domestic airlines seeking details on the way they priced their fares, suspecting that airlines were behaving like a cartel.

“It has been observed that the pricing of the airfares by various domestic airlines in India on various routes are either or identical or very closely priced," CCI secretary Smita Jhingran wrote in the letter to domestic airlines on 27 March.

“In this regard you are required to explain the reason for such similar/identical pricing of airfares. Please explain the role of cost of operation in determination of airfares," Jhingran wrote in the letter, a copy of which was reviewed by Mint.

On Thursday, a one-way Delhi-Mumbai economy seat was priced at 10,098 by GoAir, IndiGo and SpiceJet; 10,999 by Jet Konnect, 10,413 by Air India and 10,729 by Jet Airways, according to prices available at the travel website

CCI indicated that the fares were steep and asked airlines to provide details of the average cost on four routes—New Delhi-Mumbai-New Delhi, New Delhi-Bangalore-New Delhi, New Delhi-Hyderabad-New Delhi and New Delhi-Pune-New Delhi—for 2012-13 and 2013-14.

It also asked airlines to provide information about the total number of flights they operated, seats available and passengers carried on each of these route in the same years.

It also wanted to know the criteria adopted for deciding the base fare, fuel surcharge and other charges such as airport development fee, passenger service fee, service tax and the so-called CUTE (common user terminal equipment) fee.

Airlines typically divide their fares into various buckets; when the cheaper fare bucket gets sold out, the next bucket is offered for sale. CCI asked each airline to explain how it determined each of its fare buckets and how many seats were placed in each bucket, and the criteria they used to transfer seats form one fare bucket to another on “demand fluctuation".

Failure to submit details within 15 days will invite strict action, CCI said in its order.

Air India Ltd, Jet Airways (India) Ltd, IndiGo, SpiceJet Ltd and GoAir declined to comment on the subject.

Even as the fair trade regulator seems to be cracking down on steeper airfares, the Directorate General of Civil Aviation (DGCA), in an unprecedented move, asked SpiceJet on Tuesday to stop selling discounted fares to passengers.

DGCA officer Lalit Gupta termed it as a malpractice in his letter to SpiceJet, Mint reported on Tuesday.

SpiceJet was offering limited discount tickets to passengers for advance bookings at 1 plus taxes, or about 864. Before the sale, the ticket for a three-month advance booking on the Delhi-Mumbai route was going for 3,900. The ticket usually sells for 10,000 one way for immediate travel.

Typically passengers who would not have flown otherwise would buy this ticket and would pay 2,000-3,000 for a return flight, stimulating travel demand and boosting the airline’s revenue.

Before it was taken over by Kingfisher Airlines in 2007, Air Deccan offered such cheap fares following the internationally prevalent low-cost airline model of Ryanair, Southwest Airlines, EasyJet and AirAsia.

Air Deccan founder G.R. Gopinath welcomed the CCI investigation and said there was an airline cartel at work.

“I’ve said it publicly many times that the FIA (lobby group Federation of Indian Airlines) is nothing but a cartel where airline bosses meet. It fixes prices sitting in five-star hotels under the guise of discussing airline-related issues," Gopinath said. “In any other country, they would have put them behind bars."

FIA declined to comment on the subject.

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Published: 02 Apr 2014, 10:37 PM IST
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