Airlines should not adopt predatory pricing under cloak of free market economy: Parliament panel

Economic Times, March 15, 2023

Airlines should ensure that they do not adopt ‘predatory’ pricing mechanism under the cloak of free market economy, a parliamentary panel said today.

The panel has also asked civil aviation ministry to put upper and lower caps on airfares.

“A perfect balance has to be maintained between the commercial interest of the private airlines and the interest of the passengers so as to enable the private airlines to grow and at the same time the interest of passengers should also be kept in mind, so that they are not fleeced in the garb of commercialisation,” PTI reported citing the panel’s report.
The Parliamentary Standing Committee on Transport, Tourism and Culture made the recommendations in its report on the ministry’s demand for grants for 2023-24. The report was tabled in Parliament on Monday.

This comes amid a sudden spike in air ticket prices during the peak travel seasons, including the upcoming summer vacation time.

In August last year, the Indian government had removed price caps on domestic airfares after a span of approximately 27 months. The ministry had imposed lower and upper limits on domestic airfares based on flight durations when services were resumed on May 25, 2020 after a two-month lockdown due to the COVID-19 pandemic.

When the caps were imposed, airlines could not charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) for domestic flights of less than 40 minutes. The lower caps were intended to protect the airlines which were financially weaker and the upper caps to protect the passengers from higher fares.

The panel also observed that presently the surge in airfares does not reflect any sort of mechanism on part of the ministry to control the fares, based on existing Aircraft Rules, 1937, as during surge in air fares the prices go beyond the acceptable or justifiable limits of ‘reasonable profit and generally prevailing tariff’, PTI reported.

On the one hand, the government plans to make air transport affordable for the common man and the air capacity is being increased but on the other hand, there is no commensurate expansion of the capacity to bring in aircraft. This creates lack of airline tickets considering the high demand and leads to increase in the prices, as per the report.

“The committee recommends that there should be a mechanism with the ministry such as capping of upper and lower prices to stop the practice of ‘predatory pricing’ or the sudden surge in prices… even though price buckets are being created as per international aviation norms, a close watch has to be maintained by the DGCA & the ministry and a mechanism should be devised to monitor the websites of various airlines to prevent them from misguiding passengers,” it said.

Further, the panel said that in case private airlines do not publish the correct information regarding fares, they should be penalised for it.

“The committee observes that the Ministry of Civil Aviation has a responsibility to the travelling public and the nation at large to ensure that predatory pricing mechanism are not adopted by the airlines under the cloak of free market economy. The committee recommends the ministry should formulate a pricing mechanism for air fares to ensure that passengers are not charged exorbitant prices,” it added.

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