Four perspectives on the Indian airfare hike issue
During Diwali consumers got slammed by heavy airfare hikes, the government is playing protector but businessmen and economists beg to differ
Indian domestic air traffic will reach 160-180 million passengers per annum by 2020 and everyone wants a piece of the pie.It's holiday season and everyone is fighting over flights.
Early in December, Civil Aviation Minister Praful Patel frowned upon a proposal submitted by Indian airlines that would hike ticket prices based on a new distance-wise fare calculation.
Usually a one-way flight between Mumbai and Delhi costs between Rs 2,500 and Rs 16,000. According to the new proposal, the highest fare slab for travel of less than 750km is Rs14,000 and Rs 24,000. For long distance travel within India (over 1,400km) the fare slabs proposed were between Rs 22,000 and Rs 30,800.
"There is no justifiable reason for such an arbitrary hike in air fares," India Today quotes Patel as saying. "[The] demand-supply gap...isn't something to be taken advantage of by the airlines," he adds.
Patel further added that the Directorate General of Civil Aviation had enough power to intervene under rule 135 of the Aircraft Rules, 1937, should it decide to.
While the minister may be scoring brownie points with the 42 million Indians flying domestically, especially after airfares skyrocketed during the Diwali holidays, Kingfisher Airlines owner Vijay Mallya isn't buying governmental intervention of this tenor.
To the Economic Times Mallya says, "Airlines are fighting for market share, so demand and supply has to be respected. Media is sensationalising the fare issue."
International Air Transport Association (IATA) Chief Economist, Brian Pearce agrees.
“I don't think the Government should have stepped in, market forces should determine air fares. In recent years, competition had driven down fares to a point where airlines were making no money. Such a situation cannot go on forever,” Pearce told The Hindu Business Line.
According to a 2010 forecast report from the Centre for Asia Pacific Aviation (CAPA) in association with SITA, the specialist in air transport IT solutions, Indian domestic air traffic will reach 160-180 million passengers per annum by 2020 and international traffic will exceed 80 million.
Today less than two percent of Indians fly in any given year, the report says.
