While Air India is offering discounts as much as 20 percent on trunk routes, private players have knocked the government’s doors crying foul over the aggressive pricing, which is cutting into their yields and have urged for intervention, sources said.
In a meeting with the civil aviation minister Vayalar Ravi, the domestic airlines’ body Federation of Indian Airlines (FIA), raised serious concerns over Air India’s pricing, which it said was suicidal and may even lead to worsening of some airlines’ financial condition.
“They (FIA) demanded that government ask Air India to increase its fares,” said a ministry official, present at the meeting held last week.
FIA also cited a rule contained in the Aircraft Act which prohibited airlines from selling tickets at below cost. Besides Jet Airways’ Naresh Goyal, CEOs of all airlines — IndiGo’s Aditya Ghosh, Kingfisher Airlines’ Sanjay Aggarwal and Spice Jet’s Neil Mills — attended the meeting.
“Air India, a full-service carrier, is under-pricing to regain market share and is sacrificing its yields (revenue per passenger-mile). When the industry tries to match Air India’s lower fares, it drops them further,” said a senior executive of Jet Airways.
“We have been selling tickets at 25 percent below our cost,” said an FIA official.
For instance, a full-fare Delhi-Mumbai return ticket costing upwards of Rs 10,000 last year, is selling for Rs 7,000 currently (booked a week in advance), in the midst of the holiday season.
“If this continues, airlines may start defaulting on their aircraft lease rentals. One or two airlines may even be forced to shut down,” said the industry source, citing the case of Kingfisher which recently announced the closing of its low-cost arm.
The source said, “While Air India will be bailed out by the government, the same does not hold good for private carriers.”
Ravi has asked FIA to submit a detailed proposal outlining their demands to be evaluated by the ministry.