Amid growing anxiety of the middle-class over rising domestic airfares, the government has assured Parliament that airline ticket prices are determined only by the demand and supply theory, and that the Competition Commission of India (CCI) is there to prevent any anti-competitive practices of airlines on the pricing front.

Airline ticket prices are governed under the Competition laws (Competition Act 2002) and anti-competitive practices are kept in check by the CCI, said VK Singh, Minister of State for Civil Aviation, and MoS for Road Transport and Highways, in a written reply to a Rajya Sabha question.

His remarks are significant as it is a clear pointer that the government is not looking to make any interventions on the airfares pricing front, and will continue to allow it to be market forces-determined despite a slew of representations over rising domestic airfares in the country.

Singh’s assurance that the CCI is there to prevent the airlines from indulging in any anti-competitive practices, should spell music to the ears of lakhs of middle-class Indians who are now increasingly opting for air travel as a convenient and time-saving mode of transportation.

Singh’s reply came in response to a Rajya Sabha question on rising domestic airfares and whether the government is strengthening the regulatory oversight to ensure fair pricing and prevent anti-competitive behaviour in the aviation industry. 

Ayodhya Rami Reddy Alla, a Member of Parliament, wanted to know the steps taken by the government to promote competition among airlines and reduce monopolistic practices that contribute to rising domestic airfares.

Singh said in his reply that airfares are neither established nor regulated by the Government. He said that airlines are free to charge reasonable air fares as per their operational viabilities subject to compliance of Rule 135 of the Aircraft Rules 1937.

The aviation industry in India has experienced significant growth in recent years, with more people opting for air travel in recent days.

Also read: Airfares take to the sky as Go First hits the ground

CONSOLIDATION IN THE SKIES

The Centre’s statement that airline ticket prices are governed under competition laws comes at a time when rising domestic airfares has become a headache for the government and there is wave of consolidation in the Indian aviation sector, which many observers feel is marching towards a duopoly. 

The recent government move to hand over control of Air India to Tata Group and the impending merger of Vistara with Air India has accentuated the concerns over lesser competition in the market. With airfares rising, there is concern of duopoly emerging if the Vistara-Air India merger proposal is approved, industry observers noted. While GoFirst is undergoing insolvency, there is little chance of Jet Airways returning to the skies anytime soon, they added. SpiceJet, the other commercial airline, is skating on thin ice, it was highlighted.

Experts’ take 

Asked if CCI would end up regulating airline ticket prices in the domestic aviation market in the coming days, Samir Gandhi, Co-founder, Axiom Law Chambers, a law firm, said that CCI is not a price regulator.

“It is tasked with ensuring that markets operate competitively and companies do not collude to fix high prices. CCI has previously scrutinized airlines and concluded that they followed a dynamic pricing system which was not the result of a cartel. 

Absent clear evidence of collusion or the abuse of dominance by a single airline company in what is known to be a highly competitive and price sensitive aviation market, it will not be within the CCIs remit to regulate airline prices”, he added.

Some experts noted that air passengers aggrieved by high airfares have no remedy as it market driven pricing and no consumer court can help and CCI too cannot help. “CCI can help only if there is any cartel and prices have been fixed by airlines together or if there is one airline that is in dominant position and has abused its dominance,” they added.