New Delhi: India's airlines are being gently nudged to desist from "predatory" pricing as the Ministry of Civil Aviation prepares to launch some sort of mechanism to regulate air fares. Sources in the ministry told CNBC-TV18 that the airline CEOs have been told "gently" that air fares should not be exorbitant as the ministry wants airlines to self regulate instead of imposing a regulation mechanism on them. These sources said though there is no stated definition of what constitutes exorbitant fares, indications have been given to airlines' top brass that maximum fare on a sector should not exceed 2.5-3 times the average fare. As of now, last minute fares can sometimes be over 10 times the lowest average.
Sounds good but how will airlines implement these "gentle" dictats? Minister of State for Civil Aviation Mahesh Sharma has, many times in the past, spoken of fare regulation and indicated that DGCA may be asked to devise a mechanism for regulating air fares.This is where airlines have a valid objection - they point out that DGCA is a safety regulator and may not be qualified to regulate fares. Besides, changes will have to be made to the Aircraft Act 1937 before any fare regulation can happen.
Air fare regulation sounds good if one is a votary of mindless populism, since world over market forces are allowed to prevail. Earlier, a parliamentary panel had come up with a bizarre suggestion: that two-three seats in every aircraft be kept vacant for last-minute emergencies and be sold at reasonable fares. This again is a rather impractical suggestion - if there are five claimants for three such seats, who should be prioritized and on what basis? Besides, why should airlines sacrifice their profits when anyway most tickets are subsidized by them to get more people to fly? An unintended fallout of any fare regulation could be a general increase in fares, even as the lower levels.
13/07/15 Sindhu Bhattacharya/First Post
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Sounds good but how will airlines implement these "gentle" dictats? Minister of State for Civil Aviation Mahesh Sharma has, many times in the past, spoken of fare regulation and indicated that DGCA may be asked to devise a mechanism for regulating air fares.This is where airlines have a valid objection - they point out that DGCA is a safety regulator and may not be qualified to regulate fares. Besides, changes will have to be made to the Aircraft Act 1937 before any fare regulation can happen.
Air fare regulation sounds good if one is a votary of mindless populism, since world over market forces are allowed to prevail. Earlier, a parliamentary panel had come up with a bizarre suggestion: that two-three seats in every aircraft be kept vacant for last-minute emergencies and be sold at reasonable fares. This again is a rather impractical suggestion - if there are five claimants for three such seats, who should be prioritized and on what basis? Besides, why should airlines sacrifice their profits when anyway most tickets are subsidized by them to get more people to fly? An unintended fallout of any fare regulation could be a general increase in fares, even as the lower levels.
13/07/15 Sindhu Bhattacharya/First Post
