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Saturday, 17 March 2018 00:00
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There is little evidence of airlines gouging, but so what?

 

It has to be quite amazing that, despite several failed attempts in the past, India’s parliamentarians are not deterred and are making one more attempt to impose price caps on the airlines industry. A parliamentary standing committee has just proposed that caps be put on the price of airlines, to prevent price gouging during certain times of the year. Certainly it is possible that, on certain days, ticket prices go through the roof, and it is also true that tickets tend to cost more in the holiday/festival season. But those are exceptions and, even in those cases, if the tickets are bought early enough, the prices can be quite different. Anecdotal evidence is not something you can go by, but fortunately, the DGCA files monthly reports on the ticket sales by each airline for most routes, and these are available on its website. These, however, show no evidence of exorbitant pricing. In the case of an Indigo, for instance, 1.6% of the seats on the Kolkata-Chennai route were sold in the highest fare bucket in December—this was the highest—and it was 0.02% for Delhi-Mumbai. In terms of revenues earned, the highest was in the Kolkata-Guwahati sector where 3% of revenues came from seats sold in the highest bracket. None of this suggests the kind of price gouging our MPs are alleging.

Indeed, when a similar charge was made in 2015, the DGCA analysed air fares on 18 routes including high density routes (Delhi-Mumbai and Bangalore-Mumbai) and low-density ones (Kolkata-Port Blair) during the four quarters of 2014. In the fourth quarter of 2014, on the high density Mumbai-Delhi route, high fares accounted for just 2.6% of Jet Airways revenues, 1.4% for Indigo and 0.5% for Air India; low fares accounted for 9% (Jet Airways), 22.2% (Indigo) and 0.3% (Air India) and bucket fares accounted for the balance.

MPs need a crash course in how businesses run. In the old Air India days, all prices tended to be the same within the same category—economy, business class—so it didn’t matter whether you bought the ticket today or a month ago. That, however, has changed and tickets bought three weeks ahead may well turn out to be half the price as the ones bought a few hours before the flight. MPs can frown on this form of pricing, but this is what has made flying so affordable and the rush of traffic is what has made India one of the most exciting aviation destinations today.

So before making wild allegations, MPs would do well to understand that caps on the ‘surge’ in airline tickets will mean all tickets—not just those sold at the last minute or during festive season—will cost more. And since there are specialist bodies like the Competition Commission of India (CCI) to guard against collusion, if the MPs feel the airlines are indeed indulging in inordinately high pricing, why not refer the matter to CCI for an investigation?

 

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