Fare hike: Regulator writes to airlines

Sources said the hike was decided at a meeting of the industry’s lobbying body.

The Directorate General of Civil Aviation (DGCA) has shot off a letter to all airlines seeking details of the sudden and steep fare hikes announced yesterday.

The move came close on the heels of Civil Aviation Minister Praful Patel’s remark that the ministry was against cartelisation, widely believed to be behind the latest fare hikes.

“The ministry is against any cartelisation among airlines. We will keep a close watch and will take strict action in such cases,” said Patel.

However, he said that any increase in fares was an airline’s own decision as aviation was a deregulated sector.

Major full-service carriers like Kingfisher, Jet Airways and Air India as well as low-cost carriers like SpiceJet and IndiGo had yesterday raised their lower-end fares by more than 100 per cent and scrapped the lowest basic fare of Re 1 to Rs 100.

Speaking about Air India (AI), Patel said the national carrier would never be part of such a cartel. The ministry had yesterday issued a statement that AI’s fares would be 10 per cent less than what Jet and Kingfisher were offering. “The national carrier will ensure competitive prices to passengers,” he said.

A Jet spokesperson said they had not received the letter but would comply with the directions. In a late night move, Jet introduced a special basic fare of Re 1 to Rs 300.

Kingfisher, on the other hand, said when every airline was fighting for a share of the shrinking market, there was no question of cartelisation. On the contrary, low-cost carriers were still offering fares starting from Re 1, it said.

In a press release, AI said it did not take part in any price fixing. It added its fares were cheaper than what its competitors were offering.

Industry experts said the fact that all airlines raised fares simultaneously and by the same amount proved that this was a case of price fixing. Several travel portals and websites yesterday showed airlines offering exactly the same fares.

Industry sources said the price rise was decided at a meeting of the industry’s lobbying body, the Federation of Indian Airlines (FIA), held last week. The meeting was attended by several airline chiefs. Airline executives denied this: “We held an informal meeting last week where several issues related to the aviation sector were discussed. However, we never spoke about fares. Fare strategies are never discussed at these meetings,” said an FIA member.

The hike in fares will have a negative impact on the already slowing growth in domestic air passenger traffic. The growth fell 5 per cent in calendar year 2008 over the previous year.