The State government is about to pen to the Union government asking it to regulate airlines from charging exorbitant fares during peak season traffic.
Minister for Airports K. Babu said the State has already taken up the matter with the Union Minister of State for Civil Aviation K.C. Venugopal when he was in the city to inaugurate the radar system at the Kochi airport last week. “The Chief Minister will also write to the Centre since it affected lakhs of Gulf-based Malayali expatriates,” he told The Hindu.
Mr. Venugopal hinted at the helplessness of the Civil Aviation Ministry in regulating airline fares under the present rules and regulations in his inaugural address at the Kochi airport.
Biji Eapen, national president, IATA Agents Association of India (IAAI), however, shot down the argument of the Minister. The Aircraft Rules, 1937, empowered the Union government to adopt all possible regulatory mechanisms in the aviation sector, including pricing, he said.
“The present regulatory system with regard to pricing is limited to the airlines registering their fares with the Directorate General of Civil Aviation in advance besides publishing it in two national dailies and the company website. What’s needed is a monitoring mechanism to ensure that fares didn’t exceed a price band set for peak season and off season,” he said.
Mr. Eapen said a working group on regulatory framework to protect consumer interest, including disclosure of tariff and condition of services by domestic airlines, formed in February 2011, of which he was a member, is yet to meet. He said the formation of the group started on a wrong note by roping in CEOs of domestic airlines as members, which would defeat the very purpose of the mechanism.
“We submitted a memorandum to the Union Civil Aviation Minister Ajit Singh in April 2012 pointing out that while airlines hike fares citing rise in the ATF (Aviation Turbine Fuel), they never bothered to lower the fare in proportion to the drop in ATF prices. We also sought a transparent mechanism in pricing and a proper regulatory mechanism to control it. The memorandum is yet to invoke any response,” Mr. Eapen said.
An airline industry official, however, defended the present pricing mechanism. Due to fluctuating operating cost, airlines take a 365-day average splitting it into three seasonal categories based on passenger movement — off season, peak, and super peak season.
During super peak season, the fare, for instance, in the Kochi-Dubai sector touches in excess of Rs. 20,000 whereas the fare will be less than Rs. 10,000 from Dubai to Kochi as it is off season in this sector during the same period. “It is the higher fare charged during the super peak season that facilitate reduced fares during off season. But the off season fare cannot be considered the benchmark in which case all airlines will face big loss as their operating costs are the same irrespective of seasons. It is this dynamic pricing based on intelligent economics that help aviation industry to survive across the globe,” he said.
Besides, all the passengers travelling during the peak season need not pay the highest fare as airline companies offer different price buckets. Those booking in advance will get much lower fare, which progressively increases as the date of journey gets closer.
The Union government has declined to bring ATF under the declared goods category, which would have led to a uniform tax structure on fuel across the country. It would have helped airlines to bring down their operating cost. At present, ATF, which accounts for about 45 per cent of the airlines’ operating cost, attracts a VAT of 4 per cent in Chhattisgarh or Madhya Pradesh while it is as high as 29 per cent in Kerala,” the official said.
The official further claimed that the fare during peak season (mid-August to mid-September to the Gulf sector) this year has not changed compared to the same season last year despite the airlines facing increased operating costs. He further said the common observation that a passenger could travel from Kochi to London at the peak season fare from Kochi to Gulf is meaningless. “The comparison if any should be made between the peak season fares of different sectors.