DGCA's airfare control faces skepticism

DGCA’s airfare control faces skepticism

Any move by the aviation regulator to control airfares in the country is unlikely to impact rates in the current free market regime, airline executives and industry experts said in reaction to a parliamentary panel’s call to take measures to check high fares.

Air ticket prices are expected to rise further due to significant capacity cuts.

IndiGo, the country’s largest airline, has grounded 74 planes until December while others including Go First, SpiceJet, Air India group and Vistara grounded 90 planes.

The total number of grounded aircraft is expected to increase to 200 in the coming months from 164 at end December, industry executives said.

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Airlines will add 150 planes in 2024, up 34% from last year, but it will still not meet the constantly surging demand for air travel. Domestic air traffic grew 24% on year to 152 million in calendar 2023, according to the latest figures from the DGCA.

Kapil Kaul, chief executive of aviation consultancy CAPA India, said the concerns around high prices may be valid. However, to address such issues, India needs a strong and independent institutional framework for all the consumer and competition-related issues like the civil aviation authority in the UK, he said.

“The DGCA’s (Directorate General of Civil Aviation) involvement in airline pricing will not yield anything except it may serve optics,” Kaul said. “The DGCA has intervened many times before and it didn’t result in anything structural.”

He also said the rise in fares is a result of demand-supply mismatch. “India, except for the last 12-18 months, had the lowest fares in the world and the current rate regime is a result of serious capacity shortage,” Kaul said.

Aviation minister Jyotiraditya Scindia recently said while airlines are routinely advised against arbitrary hikes in fares, the government doesn’t want to regulate ticket prices.

An industry executive said, “Apart from exceptional events like Covid, airline fares have been and will remain a function of supply and demand. The current and apprehended spike in fares is because of the capacity cuts as a result of grounded planes.”

The person who didn’t want to be named further said, “According to our calculations, there is very little difference in air fares booked 15-30 days ahead of travel in January 2024 compared to January 2023. Prices have dropped a tad in the busiest Delhi-Mumbai route.”

The parliamentary standing committee on transport, tourism and culture had in a recent report recommended the aviation ministry to set up a separate entity to exercise control over air ticket prices, not just during disasters and calamities but even in normal times, as “passengers should receive a fair deal at all times”.

“The implementation of price caps (during Covid-19) indicates that the ministry/DGCA is empowered to keep a check on the airfares, if deemed necessary,” the panel said in its report. “The committee also notes that due to the absence of any capping on airfares, the prices of tickets increase manifold, especially during the holidays and festival season, so much so that at times the domestic sector fares are more than the fares on the international routes,” it added.

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