Should aviation regulator interfere in fixing airfares?

Moneycontrol Bureau

Airlines chiefs and the Directorate General of Civil Aviation (DGCA) seem to be at loggerheads over making fare structure more transparent online.

While airlines argue they do not want their competitors to know how they structure fares on their network, the DGCA is keen that operators follow the Supreme Court's direction to display wide range of prices at which a seat is available on a particular route.

Why are airlines opposing a system wherein they have to display fare structure?

Airlines chiefs who met the DGCA recently argue that they do not want their rivals to know  how much a seat on a Delhi-Mumbai flight costs on a particular day and time. If we display each and every component of our fare structure, our rival carriers will immediately devise a better strategy to pull our customers with competitive pricing, is what airline operators argue.

Airline heads have also stated that the highest fare for a route is about eight times the lowest fare, whereas in foreign markets, the highest fare is over 15-20 times the lowest fare.

The issue of displaying fare structure in a more transparent manner has come up even in the past, say two years ago. Airlines had defied this directive, saying that fares are fixed after taking into account many factors. They fluctuate depending on the aviation fuel cost which is revised every fortnight. Also, airlines fix fares in three bands: the first band is the highest because an operator has to make up operating cost of a particular flight by selling first 30 percent seats. He wants to assure that even if other seats are sold at a lower price, he will not incur loss on that route.

DGCA has a different take

Consumer forums have been writing to the DGCA about arbitrary fare pricing  by airlines. Two months ago, a customer challenged transaction fee charged by airlines in case of online bookings. The SC  in an order on January 23, had taken cognisance of fluctuation in airfares and asked DGCA to make pricing more transparent. Hence, the regulator called airlines to explain their side of the story.

Despite not breaking-even on most routes, airlines like SpiceJet, Jet Airways and even IndiGo and GoAir indulged in a fare war by lowering fares by atleast 30 percent.

At the beginning of the year, SpiceJet sold 10 lakh seats at flat Rs 2013, later even Jet Air doubled its offering to 20 lakhs seats at around Rs 3,500 for a seat to ensure it fills up seats on routes where anyways seats go empty.

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