Minister discusses fare caps with airlines

MoS Mahesh Sharma tells carriers it's a social obligation', also discusses proposed plying abroad rule changes

Mahesh Sharma, the Union minister of state for civil aviation, met senior executives of airlines on Monday to discuss various issues such as the proposed change in flying abroad rules, route dispersal guidelines and cap on fares.

“We had a detailed discussion on the need to do away with the ‘5/20 rule’, the social obligation to maintain air fares in a certain range and the proposed route dispersal guidelines. We gave our perspective to the airlines,” Sharma told  Business Standard .

The minister said IndiGo founder and its parent firm InterGlobe Enterprises' group managing director, Rahul Bhatia, and SpiceJet chairman Ajay Singh were among those who attended. Executives from Jet Airways, GoAir and other airlines were present, he added.

This comes a day after Sharma, in an interview to this publication, stressed the need to keep a check on “predatory” pricing of air tickets.

“Airlines should not sell tickets worth Rs 500 and also not for Rs  30,000. There has to be a band in which the tickets should be sold. For instance, a base price could be decided for a particular route and a certain proportion of rise or decrease in the airfare could be permitted,” he'd said.

More than 100 Members of Parliament had written to the ministry recently, seeking regulations in this regard. Sharma says capping of fares is not a global practice but India’s “infrastructure is very different from other markets” and there was a need to “balance the market forces”.

The airlines are averse. “Are we in the business of making money or not?” AirAsia Chief Executive Officer Mittu Chandilya had said in an interview last month.

Last year, the ministry had circulated an internal note to discuss steps to cap fares at minimum and maximum levels for the economy class in airlines. The note had suggested the need to cap this fare at Rs 20,000. However, no decision was taken.

Recently, a parliamentary panel had also “strongly felt” that the ministry should step in to put a regulatory mechanism in place keep a check on air ticket prices.

Plying abroad

The ministry had proposed a ‘domestic flying credits’ (DFC) system to replace the current ‘5/20’ rule (at least five years of domestic operation and 20 aircraft), to help new airlines such as Vistara and AirAsia India start international operations. It was proposed that new airlines should earn at least 300 DFCs before starting flights on long-haul routes (more than six hours). And, at least 600 DFCs to start short-haul routes, including to Persian Gulf countries.

The ministry has also linked the flying abroad rule with the need to fly to remoter areas. More points will be given to airlines on plying to such places than the city routes.