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Govt Rejects Massive Fare Hike Proposal By Airlines

New Delhi, Dec 3: Talking tough, the Government today rejected the proposal by domestic airlines for a massive fare hike and warned them of penalty and other action if the last-minute ticket prices were higher

PTI Updated on: December 03, 2010 20:37 IST
govt rejects massive fare hike proposal by airlines
govt rejects massive fare hike proposal by airlines

New Delhi, Dec 3: Talking tough, the Government today rejected the proposal by domestic airlines for a massive fare hike and warned them of penalty and other action if the last-minute ticket prices were higher than average ahead of the high-demand Christmas-New Year break.

Asserting that the Government can't remain a mute spectator to the move by the air carriers, Civil Aviation Minister Praful Patel said there can be "no justification" for airlines to hike fares in an "arbitrary manner".

It was also decided to establish a Civil Aviation Economic Advisory Council, on lines of the Safety Advisory Council set up after the Mangalore crash, to advise DGCA on all economic and financial issues relating to the aviation sector, including safeguarding consumer interests.

A notification to create this Council, to be headed by the new Civil Aviation Secretary Nasim Zaidi, would be issued next week, Patel said. Besides DGCA and the Ministry, it would include CEOs of airlines, representatives of IATA, consumer bodies and industry organisations like FICCI and CII.

"There was an extraordinary hike in fares during the Diwali vacation. We do not want that to be repeated during Christmas,"  Patel said, adding that the distance-based fare slabs, proposed by all Indian airlines, were being "rejected".

Top executives of all Indian carriers have been called for a meeting tomorrow to explain why such high fares had been proposed. "Government and DGCA have viewed these developments (high fare bands) very seriously and we feel corrective action must be taken," Patel said.

While the government or DGCA were "not in the business of regulating fares on a daily basis, we can't be mute spectators to such developments. There can be no justification for airlines to hike fares in an arbitrary manner", he said.

DGCA would exercise its powers under Rule 135 of Aircraft Rules 1937 in taking action against airlines if they raised fares substantially without reasons, he said, adding that the aviation regulator had "a wide range of powers" which could be used to ensure transparency in fixing of airfares.

"Government may also involve Competition Commission to deal with errant airlines, if the need arose", Patel said.

He said the kilometre-based fare slabs "do not merit any consideration. It must be sector-wise, category-wise and period-wise so that there is transparency and a level-playing field for both passengers and the industry".

As per the proposals, the airfares were quoted by the airlines for four distance slabs of less than 750 km, 750- 1,000 km, 1,000-1,400 km and beyond 1,400 km.

Under it, a passenger buying an economy class ticket closer to the travel date may have to shell out Rs 10,500 for a Delhi-Chandigarh or Chennai-Coimbatore flight and anything upto Rs 40,000 on the Delhi-Bangalore or Delhi-Kolkata route.

"Our objective is not to micro-manage or determine the fares, but to disallow moves like charging Rs 30,000 on a sector which has been averaging at Rs 10,000. I can assure you that action will be taken in such cases," Patel said.

Either exorbitant fares or "predatory fares" (lowering of ticket prices even below cost to undercut competing airlines) would both not be allowed, the minister said.

"We have to strike the right balance by maintaining the interests of both airlines and the consumers," he said.

After analysing the airfare proposals following DGCA directives, the regulator found that none of the carriers had furnished route-wise, category-wise tariffs across their networks and this did not meet the requirements of an Air Transport Circular.

"The manner in which the airlines had filed tariffs with DGCA were completely different from the manner in which it was offered in the market," DGCA officials said.

The airlines had also not made public the airfares offered in the market or in terms of buckets of fare categories, depending upon the number of days of making the advance booking from the date of travel, they said.

The newly-created Tariff Analysis Unit of DGCA has now been asked to vigorously monitor tariff of domestic carriers on a regular basis and to continue reporting "any abrupt increase" in airfares to the DGCA so that timely directives can be issued to the concerned airline.

The DGCA, which would start meeting airline officials from tomorrow, would take further action to ensure transparency and protecting consumer interests after assessing the results of these meetings, they said.

The officials made it clear that there should not be a situation where the airlines fleece passengers through a huge fare increase.

Regarding the terms of reference of Economic Advisory Council, an official spokesperson said it would recommend steps to ensure public disclosure of tariffs and services provided to passengers, boost air connectivity to remote and under-served areas, increase investments in the aviation sector and ensure its viability. PTI

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