Tuesday, December 7, 2010

Indian Carriers Against Government Fare Regulations

AWIN First Dec 06 , 2010
Neelam Mathews

Domestic carriers in India are adamently opposed to the Ministry of Civil Aviation’s plan to take action against those increasing their fares to what it deems as unacceptable levels as traffic surges after two years of recession.

The airlines say market forces should determine the fares.

As a result of increases in passenger capacity, air fares surged with the start of the peak season last month. Not satisfied with the airlines’ responding to an inquiry on the upsurge in fares last month, the Directorate General of Civil Aviation, following meetings with domestic airlines on Dec. 4 and 6, has told them to maintain transparency in tariffs. The airlines have been directed to upload the route-wise tariff across networks in various fare categories and to reduce tariffs.

“It is gratifying to note that tariffs during the last 48 hours have shown a downward trend of nearly 25% in many sectors. However, close watch will continue to be maintained on the situation by the DGCA and airlines should not resort to any unreasonable and excessive increases in their tariffs in coming weeks,” says the DGCA.

“This is wholly unacceptable and shows high-handedness of the government as there is no rule that supports this ruling. Besides, nobody in the government asked airlines to increase their fares when they were priced at dangerously low levels,” says an airline official.

“This situation has arisen as a result of an increase in passenger capacity with no increase in fleet capacity,” says aviation analyst Jitender Bhargava. “Airlines have many aircraft still on ground following the recession. This decision may stunt the growth of the industry in the long run as this is the time when ‘real’ pricing is coming to fruition,” he adds.

Another airline official says the market follows a demand-and-supply curve. “Let market forces determine pricing,” he adds.

A Southeast Asian analyst holds the view that there might be cartelization among the airlines and “that is what the government needs to worry about.”

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