Airlines allowed free rein on ticket pricing

New Delhi: After a series of flipflops on capping airfares, the government has refused to tighten the screw on airlines. Instead, it wants the carriers to evolve a self-regulatory mechanism, leaving the latter free to manipulate ticket pricing. In a meeting with the representatives of scheduled airlines, aviation secretary RN Choubey expressed concern over spiralling airfares in some cases, but preferred not to impose any government regulation.

“The chairman (aviation secretary) expressed concern over the spiralling prices of air tickets in some cases and said he preferred that the stakeholders evolve a self-regulatory mechanism to cap airfares,” the minutes of the meeting held on July 14 revealed. In the recent past, lawmakers have demanded regulation of predatory pricing – capping of lowest and highest fares – to rein in airlines. They also alleged cartelisation by airlines on certain routes and fleecing of passengers following a surge in spot ticket prices, especially during holiday and festive seasons.

In view of the demand, the ministry had earlier mooted the idea of setting the upper limit of economy class fares at Rs 20,000 but later retracted following protest from the airlines. The ministry has, however, set up an airfare monitoring cell in the directorate general of civil aviation (DGCA) to keep a watch on any sudden spike in airfares on key sectors.

The aviation regulator, after studying fare trends on 18 high traffic routes, including the Mumbai-Delhi and Bangalore-Delhi sectors, said in a June report that the airlines were not overcharging. Fair trade watchdog Competition Commission of India (CCI), too, has intervened to stop cartelisation by airlines on ticket pricing and even launched a probe into the allegation. It has, however, not found any concrete evidence of manipulation.

Amadeus India managing director Ankur Bhatia, who tracks domestic and international airfare trends, said the government had unsuccessfully tried to regulate tariff for the last many years. “We have seen Re 1 and Rs 1 lakh fares on the same routes,” Bhatia said. The idea of capping airfare has not found favour with the free market proponents. They have suggested leaving the pricing of air tickets to market forces. 

“The government’s decision to not intervene (in ticket pricing) is the right decision. Let market forces determine the fares. It was a bad idea to intervene,” said Kapil Kaul, CEO (South Asia) at aviation consultancy Centre for Asia Pacific Aviation (Capa). Globally, airlines do their inventory allocation in such a manner that the last few seats are sold at very high fares.

Samyukth Sridharan, president and COO of ClearTrip, one of the country’s largest online travel portals, said the last few seats in the higher bucket are expensive internationally and it was not a India-specific issue. He said fare levels in India had been passenger-friendly.

“At ClerarTrip, we have seen about 13-15 per cent drop in average domestic airfares during April-July compared with the same period last year. This reflects the impact of the fall in fuel price. We believe consumers have benefited as the fuel price drop seems to have been passed on to them completely by the domestic carriers,” he said.