Fare war: DGCA steps in, seeks carriers financial data

Written by Roudra Bhattacharya | New Delhi | Updated: Jun 3 2014, 06:21am hrs
AirfareAirAsia offered one-way prices of R990 all inclusive on its routes, later offering R5 base fare promotional tickets. Reuters
With the entry of AirAsia sparking a fresh wave of fare wars and domestic airlines like Spicejet and IndiGo joining in, the Directorate General of Civil Aviation (DGCA) is not convinced that the move is sustainable for a largely loss-making industry.

The regulator issued a circular to all airlines directing them to furnish detailed data on their fare strategy, financial performance in FY14 and their safety oversight mechanism latest by June 13. The regulator, however, has decided not to intervene in the fare wars for the time being. The move comes after the DGCA asked Spicejet to pull back its three-day R1 fare sale offer immediately on April 1 this year citing sensationalism and predatory pricing that had deceived the public.

A circular has already been sent to all airlines on May 30 asking for detailed information on fares, their financial position and safety oversight. We are looking for data for the last financial year 2014 and have asked them to furnish the information by June 13, sources in DGCA said.

He added, We feel the fare wars are a response to competitive pressures, so we do not plan to intervene as of now. We hope it is a well-considered decision by the airlines to cut fares so deeply. We do not want sudden sensationalism, but there will be no undue interference from us. We do not want to damage competition.

The current round of fare war started with Spicejet offering tickets starting at R1,499 for travel starting June 12 on the Bangalore-Goa and Bangalore-Chennai routes last Thursday, just a day before AirAsia announced its launch from the same date and on the same two routes. AirAsia offered one-way prices of R990 all inclusive on its routes, later offering R5 base fare promotional tickets. On Saturday, IndiGo followed the suit with a R1 base fare on flights on the Bangalore-Chennai and Bangalore-Goa sectors.

DGCA's move comes under Rule 135 of the Aircraft Rules (1937) pertaining to tariff strategy. It says: Every air transport undertaking shall maintain all records relating to tariff established by him under and on demand by the Director-General shall produce such records for inspection.

It further adds, Where the Director-General is satisfied that any air transport undertaking has established excessive or predatory tariff or has indulged in oligopolistic practice, he may, by order, issue directions to such air transport undertaking.

Nearly all airlines have posted record losses in FY14 on the back of adverse forex movement and high fuel prices, indicating that fresh discounts are likely to hurt them badly. Spicejet posted losses of R1,003 crore last fiscal, while Jet Airways recorded over R4,000 crore worth of losses. Even state-run Air India has recorded over R5,000 crore loss in FY14.