Sky-high prices: Cartelisation by airlines?

With air ticket prices touching the skies this festive season, allegations of cartelisation by airlines have resurfaced. While a concerned civil aviation minister Ajit Singh has suggested a probe into the matter, experts say higher fares are here to stay. CNBC-TV18's Sunanda Jayaseelan and Sumit Jha report.

Rs 25,000 for a Delhi-Mumbai return, Rs 16,000 for a Delhi- Kolkata and that too on low cost flights! Flying this festival season has been anything but cheap. Capacity constraints in the domestic market due to the turbulence at both Air India and Kingfisher Airlines  have helped peers, particularly during the current festive season which sees peak travel rush but this has also resulted in higher ticket prices and in turn led to allegations of cartelisation by airlines.

All of this has prompted civil aviation minister Ajit Singh to not only ask the aviation regulator DGCA to look into these high prices but also suggest a probe by the competition council of India.

Experts however do not agree. They say the recent suggestions of cartelization, that is, airlines colluding with each other to fix a common, and high price are not new and are entirely unfounded. According to them, airlines helped by the sector's capacity constraint and fed up with losses, quarter on quarter, have started pricing tickets closer to actual costs versus pricing it below costs like they used to earlier. 

"So for the first time airlines are saying that they will not compete for market share. We will compete for bottomline instead. That matters more. The DGCA has shown a 19% decline in market share in weekly departures in the peak season. It's a model where the market has shown maturity of not chasing market share," Amber Dubey, Head - Aviation, KPMG India said.

And industry veterans, who feel prices will not come down anytime soon, say the government should instead look at increasing capacity.

"DGCA knew that there is a capacity constraint during the approval of the winter schedule itself. Why did they not instead look at increasing capacity, approve newer airlines." Jitendra Bhargava, former executive director, Air India said.

But then again, consumer interest also needs to be protected. For that, the government is looking into another aspect- lack of transparency on pricing of tickets, especially the arbitrary nature of bucket system that airlines employ to determine fares. CNBC-TV18 learns that the government is finalising a body with a mandate to make the booking system clutter free and consumer friendly.