Saturday, July 25, 2015

Price caps on airline fares: Is the aviation ministry divided on pricing regulation?

If the airlines want more people to travel, they need to have a realistic pricing system,which means price caps on domestic airfares. That appears to be the government's logic for fixing the maximum and minimum limits on airfares in the economy class.
While civil aviation minister Ashok Gajapati Raju is said to be in favour of leaving commercial decisions to airlines, his junior, Mahesh Sharma, has been advocating a proactive government role.
According to Sharma, the price capping could be done through three ways:
1.Consultation with airlines to arrive at a fair range within which the maximum and minimum airfares will fall
2. DGCA should study the different airfares on various routes in different season and then impose price caps it deems appropriate
3. Deriving the tariff based on the fares of national carrier Air India.This means on select routes on which ticket prices are high, Air India maybe asked to slash fares significantly,hoping that private carriers will follow suit.
"This is a matter of discussion to put price predating and price capping on the airfares," he said in Parliament yesterday, adding: "During the earthquake in Nepal, we had decided the fares for Air India to be Rs.4,000 and all the other airlines had also kept their fares around it."
24/07/15 FP Staff/F.Business
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