Airlines may go telcos' way if low-fare regime does not end: SpiceJet CEO

If Indian airlines do not follow pricing discipline, they will see a similar financial strain: Ajay Singh

The aviation sector could experience a bloodbath like in the telecom industry due to a low-fare regime triggered by competition, head of the country’s second largest carrier SpiceJet Ajay Singh has said.  

Welcoming the decision of the telecom companies to raise tariff, Singh said if Indian airlines don't follow pricing discipline, they will see a similar financial strain. "It is important that we learn lessons from the telecom sector. We need to take steps urgently and stop selling tickets at prices which don’t even cover the operating cost," he pointed out.

Incumbents in the telecom industry have been saddled with record losses and piling debt due to fierce competition from a new player, adverse court orders, high taxes and expensive spectrum buy.

In a surprise development, Reliance Jio announced its intention on Tuesday to raise mobile phone tariffs, following a similar move by rivals Vodafone Idea and Bharti Airtel a day earlier.

While analysts expect this to bring down the pitch of the fierce battle between the old and new telcos, a pricing coordination is yet to emerge among the airlines. In fact, the peak festive season fare for airlines was cheaper by 20 to 25 per cent on metro routes.

Without taking names, Singh compared the disruptors in the aviation and telecom market--IndiGo and Reliance Jio, referring to them as "monopolistic players".

"There are similarities between the two sectors. Both have monopolistic players, both have a public sector company subsidised by the government, and both are struggling due to pricing indiscipline," Singh said.

When Business Standard asked IndiGo CEO Ronojoy Dutta if the airline uses its 45 per cent market share to control pricing, he rubbished the claims. "If there is any notion that a high market share will lead to high price, it is wrong. The load factor requirement drives pricing. No one can price in isolation," Dutta had said, adding that in a country like India, airlines can't price beyond a level.

Singh argued if IndiGo wanted, it could raise prices and other airlines would follow. "With close to 50 per cent market share, you definitely can't follow other players. You have to raise the price. Others will follow," Singh said.

Earlier, Singh had raised the issue of monopoly with then Minister of State for Civil Aviation Jayant Sinha, who had proposed a cap on the number of slots an airline could hold in metro airports to curb monopoly. The proposal was never finalised.

When asked if the government should force a lower cap for ticket price, Singh said it wouldn’t be a good idea. 

"If you are asking the government to set a lower cap, someday they will also set a higher cap. The industry, and not the government should decide such things," he said.