Private airlines like Jet Airways and IndiGo want public sector carrier Air India to raise air fares to make up for their losses. The top executives of these private carriers last Saturday met the aviation ministry officials to discuss that the national carrier was selling tickets 15-20% lower than the operating cost forcing them also to offer seats at discount.
?Jet Airways has claimed that they were losing R5 crore a day due to lower airfare prevailing in the domestic market. IndiGo said their losses were to the tune of R1 crore a day,? a senior aviation ministry official told FE.
He however said that the ministry would not dictate as to how Air India should price their tickets since airlines are free to charge any fare depending upon their operating cost, return and the premium thereon.
The official stressed that only market forces ? demand and supply ? can determine the tariff. ?For Air India the preference is market share and accordingly they are doing the business. Selling products at a lower price for gaining market share is the global practice,? the official said.
As per official sources, private airlines have made the case for a raise in fare on the ground that they, unlike Air India, do not get any financial support from the government and hence they should be in the position to increase fares.
The domestic airline industry has been under financial stress for several months with rising fuel price, weakening rupee and lower air fares.
The Centre for Asia Pacific Aviation (CAPA), a global aviation advisory firm, had earlier forecast that the private carriers together would post a combined profit of around $250 million in the current fiscal but it is likely to revise its estimate downward in the face of adverse factors.
?It?s difficult to say whether we would report profit for the full financial year given the high fuel price, irrational ticket pricing by rivals and depreciation of rupee,? SpiceJet COO Neil Mills said.
Private carriers have pressed the panic button with its officials meeting Pulak Chatterjee, principal secretary in the Prime Minister?s Office on the issue of below-the-cost pricing. The domestic airline industry is saddled with an accumulated loss of around R25,000 crore and a debt of over R60,000 crore.