Amid the growing call for a government intervention to regulate the increasing air travel fares, the aviation ministry has said that it is up to the airlines to self-regulate the prices.
Aviation Minister Jyotiraditya Scindia said on Thursday that the airfare is neither established nor regulated by the government.
What minister said
While replying to a written question in the Lok Sabha about the surge in airfares and steps taken by the government to address the issue, Scindia said the airfare as set by the airlines.
“As per prevailing regulations, airfare is neither established nor regulated by the government. The airline fare system runs in multiple levels (buckets or RBDs) which are in line with the practice being followed globally.
How airlines decide fares
“The fares are fixed by airlines keeping in mind the market, demand, seasonality and other market forces. The airfare increases with the increase in demand of seats as the lower fare buckets get sold out faster and move to higher fare buckets,” he said.
What government has done
Scindia informed that the Ministry had consultations with airlines and the representatives were advised to self-regulate and keep passengers interest in mind while fixing the airfares.
“Airlines have also been sensitized to exercise moderation in pricing, and to keep passenger interest in mind. The airlines have committed to ensuring that airfares do not surge during events such as natural disasters, calamities, etc,” he said.
On the question raised by the Revolutionary Socialist Party NK Premachandran on who is the authority for regulatory mechanism, Scindia said, “Civil aviation is a Deregulated sector. It was deregulated in the year 1993. We do have a Tariff Monitoring Unit that monitors 60 routes on a random basis, When we find there is excessive pricing we convey that to airlines.”
How airfares are decided
The aviation minister said that airfares across various countries are dynamic in nature and follow the market principle of demand and supply.
“The fares are also dependent on a number of other factors such as the number of seats already sold on a particular flight, prevailing fuel price, capacity of the aircraft operating on the route, competition on the sector, season, value of INR against US dollar, holidays, festivals, long weekends, events (sports, fairs, contests) etc.
“Globally, most countries have deregulated their aviation sector–removing government-imposed entry and price restrictions on airlines. Deregulation has led to increased competition between airline carriers, leading to decrease in airfare.
“Apart from month of January, there has been a decline across most of the routes keeping seasonality in mind when there is seasonality then the fares do go up,” he said.
Scindia further mentioned that the hike in prices of airfares has not gone up in proportion to the recent surge in prices of air turbine fuel.
“Air turbine fuel is close to 40 per cent of the operating cost of the airline. ATF prices have gone up from Rs 55,000 per kilo litre to 1,50,000 per kilo litre and airfares have gone nowhere in rationale to that,” he said.
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