Fare game

Will passengers benefit from populism on air fares?

The Directorate General of Civil Aviation’s (DGCA’s) attempts to curb soaring air fares is well-meaning but misdirected and, probably, ineffective as previous such attempts have demonstrated. If anything, its recent strictures against airlines’ opaque fare structures highlight the urgent need to fast-track the formation of a truly independent regulator — that means sans a former civil service officer as its head — for a market that is increasingly demonstrating signs of covert cartelisation. Theoretically, the DGCA directive is unexceptionable and it is also understandable why the minister, Praful Patel, has jumped on this populist bandwagon. It is asking airlines to declare the price band for each sector and notify any changes in air fares within 24 hours. The problem for airlines is that, in line with global practice, setting air fares has become an extremely dynamic business that is related to the flight date, seat availability and the prevailing competition on each sector. Filing minute changes in basic fare on each sector will introduce an unnecessary level of clerical work and, more to the point, it is difficult to see how this will help consumers or lower fares.

For one, the basic fare is one element in a tower of charges and taxes a consumer pays. For another, notifying the DGCA of each minute change after they have been made is unlikely to help any consumer. Another significant point to consider is that the DGCA is a regulator controlled by the government that also runs an airline. It is well known that Air India is far less dynamic in setting its air fares than its private competitors, as its rapidly plummeting domestic market share shows. Although the new circular also covers Air India, it is hard to escape the perception that this reporting requirement is partially designed to slow down the private competition as much as to provide a pro-consumer spin to a ministry that has recently been the focus of considerable controversy. If the DGCA really wants to benefit consumers, it should ask airlines to declare the number of seats they are allocating for lower fares on each flight.

The real question that the DGCA needs to ask is why fares have risen on the all-important and always busy Delhi-Mumbai route, and that too to an astonishing Rs 20,000 in recent months. This may have as much to do with the fact that a number of flights on the sector have been cut owing to repair work on one runway that keeps it closed to traffic for eight hours every day. Fewer seats and rising demand equals rising fares. Rentiering or demand-supply mismatches? A bit of both, perhaps, but that’s part of the game when the skies are opened to private airlines. Airlines too have been short-changing passengers by cutting costs and corners. The once celebrated Jet Airways is fast losing sheen, and despite so much of the private sector in airlines and airports, the experience of air travel is becoming more tedious by the day.