Domestic carriers such as Kingfisher Airlines and SpiceJet have hit back at the government?s directive to bring down airfares. The airlines have said the government should instead reduce taxes on jetfuel and bring down airport charges which would result in lower tariff for passengers.
According to airline sources, most of the private airlines have taken this stand while responding to a notice by aviation industry regulator directorate general of civil aviation (DGCA) asking the carriers to explain the reasons for high fares.
?Fare changes vary from hour to hour and from flight to flight depending upon demand and supply. Fares for a certain flight could be high because of a sudden increase in demand. But the fact of the matter is that we are still losing money by charging the so-called very high fares,? a Kingfisher Airlines executive told FE.
The official said the government should take measures to rationalise taxes on aviation turbine fuel (ATF) to ensure lower tariff. The jetfuel constitutes nearly 35% of an airline?s total operating cost.
Airfares in the last few months have gone up on the back of higher demand, far higher than the capacity induction by the airline industry. As per an estimate, seat capacity in the domestic market has gone up 8-10% in the last one and half year against a jump in passenger traffic by over 20%.
?The government does not want us to fix tariff on the basis of demand-supply dynamics. Neither does it want us to launch the promotional fare of Rs 99 and Rs 555. We are going back to stone age,? a senior executive of another airline said.
Airlines are believed to have taken the stand that tariff-fixing is a non-regulated domain and it should be best left to the carriers. The government is, however firm on the issue and working on the idea of prescribing fare-fixing formula by inserting changes in the civil aviation rules, the set of guidelines governing the sector.
Civil aviation minister Praful Patel had last week warned air carriers against predatory pricing and threatened to take action. He had also directed the carriers to publish a price band indicating lower and higher fare on every route and inform the passengers.