Business | Aviation
India threatens action against airlines for predatory fares
Travellers outraged over hikes that coincide with passenger traffic surges.
- By Amy Kazmin, Financial Times
- Published: 00:00 November 29, 2010
New Delhi: India's government has warned domestic airlines that it intends to crack down on "predatory pricing" after carriers sharply increased fares on popular routes during a recent festival, as overall passenger traffic surges.
Indian travellers were outraged during the recent festival of Diwali — Hinduism's biggest gift-giving holiday — when some carriers charged about Rs25,000 (Dh2,000) for a last-minute Delhi-Mumbai round trip ticket, a route on which fares usually range from Rs10,000-Rs15,000.
Fares on other popular routes also surged during the holiday period, as local airlines sought to cash in on a newly buoyant market.
"This predatory pricing can't be allowed to continue," Praful Patel, the civil aviation minister, said at an industry conference in New Delhi on Thursday. "We shall try our best to bring discipline."
Patel said the carriers should have a "price band" for different routes, and warned that the director general of civil aviation, the industry regulator, had "special powers" that could be invoked if airlines did not act appropriately, especially with last minute travellers.
The warning comes as India's airline passenger traffic numbers are soaring after the difficulties of 2008, when carriers — which had been growing at about 25 per cent a year for several years — were hit by surging fuel prices, and plummeting passenger traffic.
Pre-crisis peak
From January to October, Indian airlines carried 41.9 million domestic passengers, up 18 per cent over the same period last year, and higher than the pre-crisis peak in 2007.
Dinesh Keskar, chairman of Boeing India, said passenger load factors are now about 80-82 per cent, and are likely to be even higher between now and February — the peak season for foreign travel to India. But Indians remain highly price sensitive.
About 70 per cent of India's domestic air travel is on low-fare carriers such as Indigo and SpiceJet, and the low-fare arms of full-service private carriers, Jet and Kingfisher.
"We are extremely cost sensitive consumers as a culture," said Samyukth Sridharan, SpiceJet's chief commercial officer. "People view aviation as efficient, point-to-point on-time travel."
Kingfisher Airlines, India's second-largest carrier by market share, said on Thursday it had taken advantage of improving market conditions to reach a deal with lenders to restructure an estimated $1.3 billion in outstanding debts.
The airline — which is owned by the billionaire liquor baron Vijay Mallya — told the Bombay Stock Exchange it is converting about $445 million of debt into equity.
The repayment period for the remaining debt would be extended to nine years, with a two-year moratorium.
Business Editor's choice
-
Firms must up the ante on digital marketing
Businesses in the region can leverage the untapped potential of social media and other communication platforms
-
Younus' name proposed as World Bank chief
Bangladesh prime minister's suggestion comes as surprise due to recent dispute
-
TRA finalises inter-network number portability
Mohammad views presentation on new strategy to set up Dh300m fund for the ICT sector
