Letters: Unbundling prices

Apropos Masoom Gupte's report "How far is too far" (The Strategist, June 10), the author simply restates the differences between bundled and unbundled pricing, without adding much substance to the discussion. I support unbundling prices for most services - airline or others - but I was expecting to read how it helps or hurts the various stakeholders: existing airlines, new airlines, the consumer, and government (via taxes). Sadly, the report merely took a silly restaurant and hotel analogy too far (pun intended), without going into any depth or making any new arguments.

The analogy of unbundled aviation pricing to restaurants and hotels is very weak, since the latter has low barriers to entry and exit. Traditionally, businesses with a high barrier to entry have been over-regulated to protect the consumer. An airline carrier operates with a limited and finite set of competitors. Unlike at a restaurant, an airline consumer does not have the choice of moving to the one next door if he\she doesn't like the value proposition. Only once in many years does an Air Asia or Air Deccan jump in with a disruptive offering.

The media is enamoured by any idea that has successfully passed muster in America, without bothering to evaluate if it's right for Indian conditions. The open cartel, where most airlines move the fares and restrictions in tandem, has removed any pretence of market-driven competition. Abusing the unbundling to pay lower taxes on base fare and lower commission to agents, while extracting super-normal profits on basic amenities like water and toilets, is also worthy of the "too far" discussion.

Mayunk Jain, Bangalore

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