India's Civil Aviation Sees No Point In Regulating Fares

Tuesday, 26th May 2015 at 15:31pm

India's Civil Aviation Ministry has cancelled plans to regulate air fares pegged by India's airlines as study reveals that price changes were too minimal to have significant impact on the industry.

The government's parliament previously requested the Ministry to look into the possibility of controlling air fares but the outcome of the review of historical versus current prices failed to warrant such action on the part of the Ministry.

Minister Ashok Gajapathi Raju of the aviation ministry said that his team evaluated quarterly air fares of India's airlines but these reveal that fare prices have either slipped or minimally increased during the period under review. He also disclosed that airlines comply with the Ministry's requirement for monthly submission of minimum and maximum air travel fares. These details he said are enough for the Ministry to conduct regular checks and balances.

Previously, the Ministry was mulling over ways to control air fares. These include putting a cap on airfare, establishing a minimum and maximum fare range, or limiting the percentage of fare hikes.

In the end however, the Ministry decided against these. He justified that establishing limits to air fares will have different implications on airlines and their costs. He added that no country has ever controlled air fares.

Minister Ashok however said that having emergency seats for those who would require them due to unforeseen circumstances may be proposed. This proposal, if implemented may address the issue on emergency travel raised by some groups of passengers.

The Air Passengers Association of India (APAI) President, D. Sudhakara Reddy opined that the civil aviation regulatory body working for the Ministry lacks technical expertise on the subject of air fare economics. Sudhakara disclosed that it is more critical for the Ministry to obtain air fare averages from airlines instead of the minimum and maximum fares, citing that airlines turn to yield management to better maximize revenues.

Yield management performance is measured using price averages, among others.

He said that airlines typically sell more tickets towards the last minute. At this point, they are able to command higher prices, and thus maximize revenue.

He explained that while an airline reports actual minimum and maximum fares having minimal price adjustments, these info do not reveal that the same airline might have strategically sold large volumes of tickets at higher-than-usual prices. Moreover, the report also excludes cancellation charges which is also a concern, according to the APAI president.

By: Pete Lee.