Govt should not intervene in fixing air fares, says IATA chief economist

Geneva: The Indian Government should not have intervened to restrict domestic airlines from charging high fares, according to the International Air Transport Association (IATA), the global body representing the airline industry.
According to the Association's Chief Economist, Mr Brian Pearce, market forces should determine air fares.
“I don't think the Government should have stepped in, market forces should determine air fares. In recent years, competition had driven down fares to a point where airlines were making no money. Such a situation cannot go on forever,” Mr Pearce told Business Line.
The Government has been mounting pressure on airlines to reduce fares, which had skyrocketed after Diwali, especially for last-minute or spot tickets.
The Civil Aviation Minister, Mr Praful Patel, and the aviation regulator, the Director General of Civil Aviation (DGCA) had warned that action would be taken if the airlines did not roll back the abrupt hike in air fares.
As a result, airlines were forced to roll-back their fares.
Mr Pearce added that if the Government keeps intervening too much, then it could lead to a situation like the one Europe finds itself in.
“In Europe, increasing taxation by the Government has pushed travel costs up by 3-4 per cent. This has resulted in fewer people flying. With Government intervention this is the risk. The aviation industry should be left to market forces and competition,” said Mr Pearce.
14/12/10 Debabrata Das/Business Line

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Categories: Indian Aviation- In General Dec 2010