Why airfares can't be more transparent

Airlines have said displaying the number of seats available at each level will further unhealthy competition in the sector.

Rajesh Pandathil March 12, 2013 10:58:20 IST
Why airfares can't be more transparent

Secrecy is sin, not only in politics but business too. But do we accuse airlines of sinning for not making their fare structure transparent? Or are they, as the Bard said, more sinned against than sinning?

Indian airlines have not yet complied with a Supreme Court directive that sought to make the fare structure more transparent.

According to a report in the Economic Times, they have now told the regulator Directorate General of Civil Aviation (DGCA) that they are unable to heed to the apex court's directive.

The court had in January come down heavily on the airlines and the DGCA, and expressed surprise at the wide range of base fares on offer from airlines.

It had also asked the DGCA to ensure that the companies comply with the regulator's circular asking them not to charge transaction fee or booking fee.

"Why do you issue circulars when you can't take action? You pass a circular but do not ensure its compliance. If they don't comply, you shut your eyes," a court bench had told the DGCA.

It also wanted the airlines to display the number of seats available at each fare level and narrow the range of fares offered, the ET report said.

Why airfares cant be more transparent

Airlines have also said this will tantamount to micro-managing of the sector, by regulating the air fares, which goes against the spirit of liberal business.Reuters

It is this directive that the companies are unable to comply with. They have said displaying the number of seats available at each level will further unhealthy competition in the sector. They fear the companies will start monitoring each other and start acting accordingly, by cutting fares or increasing the number of seats.

They have also said this will tantamount to micro-managing of the sector, by regulating the air fares, which goes against the spirit of liberal business.

They have also said they use technology and mathematical algorithms that take into account different variables to determine the fare range.

At the outset, these arguments seem to be just aimed at creating an impression that the fare structure is so complex that it will go over the customers' head.

How could display of the number of seats at each fare level increase unhealthy competition? Why should the companies resort to steps like aggressive cutting of fares, if they are financially not viable?

If the airlines are ready to explain in simple terms what constitutes their fare, customers are sure to understand it and that will actually reduce the unhealthy competition. This will also help them resist the micro-management by the aviation authorities.

But for that transparency is the key. And there has not been any instance where transparency has resulted in unfair or unhealthy competition.

Clearly, the companies' only objective is to stonewall a directive that would have furthered healthy competition in a battered sector.

However, the airlines are not the only ones to be blamed for the situation. The government's irrational tax policies have also contributed to the high air fares.

But why should the customers be bothered about all these? For them, both the government, which has not been able to implement its own circular, and the airlines, which are dead against any transparency in ticket pricing, are sinners.

The bottom line is that with the airlines remaining defiant, for a transparent pricing structure in aviation, customers will have to wait for the Supreme Court's final order on the airfare issue.

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