Fare play: Are DGCA's information demands on airfares excessive?

The Directorate General of Civil Aviation’s (DGCA’s) demand for airlines to submit granular, ticket-wise data on airfares for the past two years flies against the trajectory of the Indian aviation industry over the past three decades. It has raised afresh the spectre of regulated airfares, which could ground the sector. The regulator has denied such plans; it has said the objective of seeking such detailed data is for analysis. This explanation does not fully outline the purpose of such an “analysis” but it does suggest a misunderstanding of the basic mechanics of airlines’ competitiveness.

 

Ever since the concept of low-cost carriers flew into the Indian aviation scene in 2003 and dynamic pricing entered the lexicon soon after, airlines have jostled to price their tickets as competitively as possible to maximise market share. Doing so is an intricate exercise, involving managing different fare slabs and charging various price points within fare slabs in response to market conditions. Globally, as much as in India, an airline’s skill in managing such daily complexities and balancing costs determines its success in the marketplace. The critical point, as the Federation of Indian Airlines (FIA) has pointed out, is that divulging such confidential data in the public domain amounts to risks to airlines’ competitiveness.

 

The FIA represents India’s largest airlines such as Air India, IndiGo, and SpiceJet. The DGCA does monitor airfares randomly every month to ensure that they do not exceed the price range set by airlines. This is an acceptable level of inspection, which prevents airlines from indulging in outright price gouging. This time, however, the aviation regulator’s demand appears to be a response to online indignation expressed by travellers and certain members of Parliament, calling for greater scrutiny of high airfares during the Kumbh Mela rather than addressing a structural consumer issue. No surprise, airlines have offered to share only an analysis of the percentage of tickets sold in various slabs on different routes. The fact that the DGCA has tasked Tata Consultancy Services with the analysis is also problematic in theory since the software major belongs to the group that owns and operates Air India.

 

The domestic aviation business has been one of the showcases of the virtues of deregulation and open competition. The Indian government’s deregulation of air fares after 1994, four years after it introduced its open skies policy, readied the runway for private airlines to soar, setting new standards of service and introducing concepts in pricing. Since then, the only time the DGCA has stepped in to regulate fares was during the pandemic — in 2020 — when it stipulated a floor and ceiling on air fares. But that episode was a specific response to an emergency. This relative hands-off policy, backed by a robust expansion in airport infrastructure, both private- and government-owned, has seen the market skyrocket and expand the geographical and socio-economic reach of aviation. India has become the world’s third-largest aviation market, flying over 300 million passengers in 2024. Today, several Indian airlines compete globally via international operations. Demanding proprietary information is not the best way to enhance the competitiveness of an industry.