AirAsia, SpiceJet: DGCA should be on customer's side, but not over-regulate

The Directorate General of Civil Aviation (DGCA) has stepped in twice in recent days to stop low-cost carriers from implementing their tactical marketing plans and charges.

This week, the aviation regulator stopped AirAsia, the new kid on the block which will start commercial operations from 12 June, to stop charging extra for cabin baggage. It also asked SpiceJet to suspend its Re 1 fare scheme pronto.

The reasons given are that AirAsia did not tell the regulator about its new charges in advance (Rs 199 for baggage upto 15 kg paid in advance, and Rs 300 if paid at the time of check-in); and in the case of SpiceJet the problem was opaqueness of the offer. Nobody knew how many seats were on offer at Re 1 - and whether the numbers on offer were so few as to be meaningless.

Two points are worth making here. India needs regulation that is tough on real wrongdoing, and light on mere technical violations.

The failure to inform the regulator about baggage charges is a mere technical violation and should, in fact, not even have needed the regulator’s prior approval. How some service or facility is priced by an airline is not the regulator’s business - as long as there is no catch to it and travellers are not gypped by being told something and given something else.

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As for the clamping down on SpiceJet, the only intervention needed was to force the airline to tell passengers how many tickets were on offer at that price, so that most people understood whether the Re 1 fare was like trying to win a lottery or a real benefit. It wasn’t as though the fares were on offer to a reasonably large number of people at a super-low rate. This intervention was valid for it is indeed the job of the regulator to make things more transparent.

Going forward, the DGCA would do well to have its own clear set of guidelines on what are good customer practices and what it will come down heavily on. Right now, airlines have no way of knowing when they are in the wrong and when they aren’t.

Broadly speaking, beyond areas like safety, and technical aviation rules and regulations, where regulation necessarily has to be intrusive, the DGCA should not meddle in commercial decisions on fares and fees as long as they are transparent and stated upfront. In fact, the DGCA should publish a simple set of dos and don’ts in these areas so that airlines can self-regulate.

#1: Fares: Base fares and fuel surcharges should be clearly indicated and changes in any of them should be told to passengers well in advance. Most airlines now follow dynamic pricing, where fares rise as seats get filled and one gets closer to the departure date. It would be a good idea for airlines to publish how they decide these dynamic fares so that the public knows it is not being gypped. The DGCA need not intervene if the basis of dynamic pricing changes every season, but the proportions and cutoffs where prices change need to be transparent. As long as airlines are transparent, the DGCA should have no role in pricing at all.

#2: Charges: All optional costs - for baggage, food, etc - should be clearly stated. The DGCA should have no role in determining what these charges should be, as long as they are made known upfront and passengers know what they are getting into.

#3: Overbooking and forced cancellations: Many airlines tend to overbook based on their internal data on cancellations. This is to avoid seats going empty due to last-minute cancellations. All airlines should be asked to clearly state their overbooking policies, and compensate passengers offloaded as a result of occasional miscalculation. The rate of compensation should not be arbitrary depending on which passenger creates a fuss. Compensation should be routinely given to all passengers who are offloaded.

#4: Compensation for flight delays/loss of baggage: Currently, there is no uniform compensation rule for flights that are delayed for reasons other than air traffic control and landing permissions. The DGCA needs to put in place clear norms for compensating passengers if their flights are delayed, say, beyond, 90 minutes - or whatever is a reasonable cutoff. The DGCA needs to investigate all flight delays that go beyond this limit, and ensure compensation. These findings should be made available on the DGCA’s website, so that passengers can claim compensation.

#5: Charges levied by booking portals: Many passengers do not know that travel portals (Makemytrip, Cleartrip, etc) charge a fee over and above the ticket price and that buying directly from an airline portal can often be slightly cheaper. The booking portals need to be upfront on their own charges, and also state clearly that cancellation charges are either the same as that of the airline, or whether they also charge additionally for it. They should be free to charge whatever they want, as long as customers are aware of it.

There may be other things involving passenger facilities and interests that may need elaboration, but the key is this: the DGCA should publish its guidelines and not get into pre-clearing the commercial decisions of airlines and portals. What we need is good regulation that all the regulated entities understand. What we don’t need is to make the DGCA another exponent of the licence-permit raj.