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DGCA to audit air fares on 20 busy routes

06 May, 2016

Taking cognisance of an uproar in Parliament on 2 May by the Opposition over high air fares, the Directorate General of Civil Aviation (DGCA) on Friday announced that it will conduct a fare audit of 20 routes. The rationale behind the audit is to find out whether the airlines are charging unusually high fares.

The regulator will ask airlines to furnish the amount of revenue earned through sale of the so-called highest bucket seats. These seats are on routes which are charged the maximum fare given the high demand and preferred timings. The routes are the ones between the four metros and other prominent Tier 1 cities.

A top DGCA official, requesting anonymity, said that the aviation regulator is trying to ascertain the quantum of tickets airlines are selling in the highest fare bucket.

“Based on the response, we will take a call,” the official explained, hinting at appropriate action against those found charging relatively higher fares.

The Indian aviation industry follows a dynamic pricing system wherein tickets booked close to the departure of flight may cost very high even though the flight may have seats available.

During the debate in the Lok Sabha on Monday, members of Parliament expressed concerns over airlines charging higher air fares during emergency situations such as Chennai floods and Haryana Jat agitation, and not passing on benefits of falling fuel prices to passengers.

However, this is not the first time that the government has decided to conduct a fare audit of the airlines. A similar analysis conducted for 23 routes in April 2016 for the period January-March 2015 to January-March 2016 found that there was a reduction in airfares proportionate to 18.1% fall in air turbine fuel (ATF). For any airline, ATF constitutes 40% of its operational cost.  

Interestingly, the government had previously held two rounds of talks between November 2015 and February 2016 with airlines to cap air fares. The proposal is to charge Rs2,500 per passenger for one-hour duration flights. At present, such short-haul flights charge in the range of Rs4,000-5,000. However, the idea has been opposed by various airlines.

Civil aviation minister Ashok Gajapathi Raju is expected to hold talks with domestic carriers to cap maximum ticket prices on short routes during calamities and unpredictable situations soon.

Reacting to the government’s plan to conduct a fare audit, former managing director of Vayudoot, erstwhile short-haul state-owned air carrier, and chairman of Starair Consulting, an aviation think tank, Harsh Vardhan said that such audits “by itself do not mean controlling fares”.

“Unless the government brings in some sort of regulation, which it isn’t, we cannot expect much on regulating fares,” added Vardhan.

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DGCA to audit air fares on 20 busy routes

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