Domestic airlines have formed price cartel, EICI claims

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Domestic airlines have formed price cartel. (AP) Domestic airlines have formed price cartel. (AP)
SummaryAll airlines have chosen to increase the fuel surcharge by the same amount more or less at the same time.

Domestic carriers have formed a price cartel and exploiting the levy of fuel surcharge on cargo by not applying a rational pricing mechanism for the same, a body of cargo companies claimed today.

"What has been surprising is that all airlines have chosen to increase the fuel surcharge by the same amount more or less at the same time. This has led us to believe that this action has been taken in concert," said Vijay Kumar, Chief Operating Officer, Express Industry Council of India (EICI).

The EICI alleged that domestic airlines have formed a price cartel and were exploiting the levy of fuel surcharge (FSC) on cargo by not applying a rational pricing mechanism for the same.

According to its findings, the apex industry body of express companies said, there had been substantial hike in fuel surcharge in last four years which has not been

commensurate with the highly volatile Air Turbine Fuel prices.

With effect from November 19, domestic airlines have further increased the FSC on cargo by Rs 2 per kg inspite of a drop in ATF prices, an EICI statement said.

Kumar alleged that designed to mitigate the fuel price volatility, FSC was being used as a pricing tool to harm interests of express companies, freight forwarders and ultimately the end user.

"Internationally, fuel surcharges are benchmarked to an index. This ensures equity airlines doesn't charge more when the fuel price go up and at the same time fuel surcharge is reduced when prices go down," he said.

In 2008, all airlines were levying a charge of Rs 5 per kg as fuel surcharge.

"The FSC had been revised by around 15 per cent by the airlines in November 2012, while the industry witnessed a fall in fuel prices from what was prevailing in September 2012 when the FSC was last revised," it said.

In May 2008 when fuel surcharge was first introduced the fuel prices were Rs 69,227 and FSC charged by the airlines was Rs five per kg. During the recent hike, again acting in concert, on November 19 the fuel prices were Rs 68,397 and the FSC charged was Rs 15 per kg, it said.

"The average cost for freight between Mumbai and New Delhi is Rs seven per kg and when FSC and other fixed costs are added to it and the price shoots up to Rs 28 per kg on an average. Which other industry adopts such an opaque pricing mechanism?" Kumar

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