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Full, budget airlines to lock horns at meet

BS Reporter  |  New Delhi 

The October-16 meeting of the Indian carriers in Mumbai is expected to be a stormy one, with full service carriers and budget airlines likely to lock horns over issues like regulation of fares and putting up of stiff entry barriers.
It promises to be a repeat of the meeting of airlines called by Civil Aviation Minister Praful Patel on September 28, at which full-service airlines demanded government intervention in regulation of fares and entry barriers as a way out of the financial crisis being faced by the industry.
Airline sources said full service carriers would push for budget carriers agreeing to a base price, so that revenues and yields were protected.
"One of the main reasons for the financial condition of the airline industry is unreasonably low prices. It is in the overall interest of the airlines that there is agreement on at least a minimum price," said an executive with a full-service carrier.
According to industry estimates, domestic carriers are together expected to make staggering losses of Rs 2,500 crore in the 2006-07 period.
However, G R Gopinath, managing director of budget airline Air Deccan, said: "We are against any sort of price regulation. Companies may go bankrupt, but why should the government regulate fares or airlines reach an agreement on fares? It's unethical and against the interests of consumers."
In order to ensure that a carrier's financial health did not lead to bankruptcy, and to curtail predatory pricing by carriers, the government had proposed to review the business plans and financials of airlines every quarter and suggest corrective measures. The government said it was borrowing the model from the US.
At the same time, some other full-service carriers are of the view that pricing should be left to market forces. "Why should there be a discussion on fares? We are of the view that it should be left to the market to decide," said M Thyagarajan, managing director of premium carrier Paramount Airlines.
Industry insiders said the meeting would also lay the framework for an association of Indian carriers on the lines of Nasscom or CII.
"There is no forum for airlines in the country to discuss issues and reach an agreement. The meeting will try and give shape to a formal association," said a senior executive with an airline.
In addition, the meeting is expected to discuss areas like sharing of infrastructure, ground facilities and fleet. Besides, it will work out a common approach towards the proposed civil aviation policy.

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First Published: Thu, October 12 2006. 00:00 IST