In the light of the latest decision of the Civil Aviation Ministry to remove the price bands, as a travel trade and aviation industry expert, Biji Eapen analyses the shortcomings of the pricing policy of the civil aviation regulators and how it is loaded against the interest of the air travellers.
India is the fastest-growing airline market in the world. Private airlines have taken over the skies, while airline prices have been exorbitantly inflated, making air travel more expensive to the traveling public.
Globally, distance plays a pivotal role in determining flight ticket prices. Usually, the farther the distance, and the more the travel time, the more expensive is the flight ticket price. Domestic or international, depending on the distance passengers wish to travel, the flight ticket prices also vary.
Demand-based pricing is the most conventional pricing strategy in the airline industry. It works out a pricing concept on how much the customer and market will bear. Often, airline pricing categorises passengers into one of two segments – leisure or business. Disparity and inconsistency in pricing are other factors that affect travelers. Especially at school reopening, during festive seasons, or other such occasions, airline prices are often at their peak in times of high demand. During the off-season, the exact tickets are priced at much lesser levels.
However, the Indian pricing strategy is solely based on a new calibrated dynamic system, a non-regulatory pricing policy beyond the limitations of the Regulatory Authorities and the Competition Commission of India.
Seven scheduled flights and one regional flight are enjoying the Indian airspace. The scheduled are Air India, Indigo, Air Asia, Vistara, Go First, SpiceJet, Air India Express, and the regional flight Alliance Air. The scheduled one, Akasa Air just started operation on August 7, and Jet Airways, rescheduled to begin in September 2022. The new airline, Akasa Air, projected and promoted it as a ULCC , Ultra Low-Cost carrier.
Air India, Vistara and Jet Airways are the only full-service carriers, and the rest are low-cost carriers.
At this juncture, the following issues may, directly or indirectly, affect the traveling public in India and must be reviewed and considered by the authorities:
Air Operator Certificate (AOC):
The grant of AOC on satisfactory completion of all regulatory requirements and compliance categorizes the airline as a scheduled passenger flight. It does not differentiate service levels – full service or budgeted. It is purely a commercial matter with the operator.
Though low-cost carriers are referred to as no-frills or budget carriers, over the past years, they have made significant gains compared to their full-service carrier counterparts and hold a considerable market share in India.
UDAN : vision to make an ordinary person fly
The value-based pricing was shifted unnoticed to a new dynamic time-based pricing policy over a period of time. After 70 years of independence, in 2016, the Union Government introduced the country’s new National Civil Aviation Policy and the UDAN Scheme to boost the aviation sector in India. The objective was to make air travel accessible and affordable to ordinary Indians.
The UDAN regulated pricing policy capped fares for a flight less than one hour or 750 km to INR 2500 – a well-studied, researched, and discussed policy.
Fare capping: time and distance-based pricing policy
India had imposed lower and upper limits on airfares based on flight duration when services resumed on May 25, 2020, after a two-month Covid-triggered lockdown. It had placed limits on airfares through seven bands based on flight duration. The first band consisted of flights that were of less than 40 minutes duration. The government imposed the lower caps to help airlines struggling financially due to coronavirus-related travel restrictions. The upper lids are also set, so that passengers are not charged massive amounts when the demand for seats is high. In a phased manner, the government enhanced fleet capacity from the initial capacity of 30 percent to 80 percent, paving the way for a recovery from the pandemic.
The surge in the second pandemic wave decreased passenger traffic and resulted in the cancellation of many flights. Foreseeing the deteriorating situation, MOCA permitted airlines to operate at 50 percent fleet capacity than the existing 80 percent effective from June 2021. For economic simulation, the government declared a duration-based hike, an increase of the lower limits from 13 percent to 16 percent – a network-wide fare capping.
Domestic air travel became costlier on August 12 last year as the Civil Aviation Ministry raised the lower limit for flights under 40 minutes from INR 2,600 to INR 2,900, an increase of 11.53 percent. The upper cap for flights under 40 minutes was increased by 12.82 percent to INR 8,800.
The government’s caps do not include the passenger security fee, user development fee for the airports, GST, and other unbundled charges. These charges are added on top when the passenger purchases the ticket.
On September 18, 2021, MoCA revised the fare rules, that the lower and upper limits on airfares would remain for 15 days at any given time, and the airlines would be free to charge without any limitations from the 16th day onwards.
A fifteen-day capping will not give any choice to customers. On the contrary, it will provide more leverage to airlines to increase or decrease fares within the fare band, at their whims and fancies, as they are on equal footing without competition, whereas the Russia-Ukraine war or ATF prices or currency fluctuations do not feature.
Speed, distance, and time are closely interrelated to each other. Look at the comparative shorter routes based on the aerial distances in km, which is less than one hour or 750 km.
Remarkably, these sectors are being operated (before and after the fare band) by the Airbus 320 family with A321 neo and Boeing 737 NG family, including MAX, which has a cruising speed of 828 to 876 km/h. An ATR-72 can cruise at a maximum speed of 518 km/h and Q-400 at 666 km/h. Since there were no changes in flight numbers, departure time, or equipment, it went on unnoticed.
All Indian carriers are operating these sectors with a fleet of narrow-body aircraft. Before fare capping, all these flight schedules were shown with actual flying time, 40 minutes to less than one hour. Variably, all these flight schedules today are with one-hour and above flying time- a magical swapped print.
The new airline Akasa Air also joined the bandwagon with the initial offer of INR 3483/- for Cochin-Bangalore for a flight of 366 km operating with the latest version of B737 Max, which has been proclaimed and projected as the first and only ULCC in India.
Long-haul flights: Common rated pricing policy
Long-haul flights from Delhi to Bangalore and Delhi to Kochi explicitly show that full-service and low-cost carriers offer the same base fare, irrespective of their services.
This current pricing strategy often leads to confusion for ordinary passengers. They take a ride without being able to identify the services provided by a service carrier as a part of their ticketed fare and the similar services purchased separately from the budget airlines on additional payment over the standard ticketed price.
The unbundled service charges on baggage, seat selections, food, and beverages are additional income to LCCs, and nothing parted to the benefit of the passengers for choosing a low-cost carrier.
Look at the realities:
The fare band limits system implemented by MoCA is based on flight distance and flying time to make flights accessible to citizens of every walk.
Records show that only 4 percent of the Indian population currently flies. All airlines are privatised, and, therefore, a well-planned, structured policy can only make air travel affordable for the ordinary person and make the dream of our Prime Minister Narendra Modi to see that people in rubber slippers also fly. The Civil Aviation Ministry must review, regulate, and resolve the current pricing policy anomalies to make air travel affordable to the ordinary person.
Air travel is no more a luxury in a fast-growing economy like India. Today, it is the fastest and safest form of transport, especially after the Covid19 pandemic waves, compared to road or rail journeys. However, being a monopoly of the private sector, the sector gets a free hand to fix higher price rates to churn out large profits, leaving travellers with no choice.
The author is the national president of IATA Agents Association of India (IAAI) and Chief Coordinator for the Air Passenger Rights forum. He is also CMD for Speedwings Travel & Cargo Pvt Ltd and Speedwings Aviation Academy, which is the first and only IATA CBTA Provider for dangerous goods training in India.
By Biji Eapen
Published by: ETTravelWorld
