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Airlines in India fix prices: GR Gopinath, Founder, Air Deccan

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  • karmayog - tanya
    Message 1 of 1 , Oct 31, 2012
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      31 Oct, 2012, 06.45AM IST, Manisha Singhal,ET Bureau

      Airlines in India fix prices, Federation of Indian Airlines works as cartel:
      GR Gopinath, Founder, Air Deccan

      MUMBAI: In a scathing attack against domestic carriers on price
      manipulation, GR Gopinath, entrepreneur and founder of India's first
      low-cost airline Air Deccan said airlines in India fix prices and the
      Federation of Indian Airlines or the FIA which is an airline body works as a

      Sparks flew as airline chiefs representing low-fare airlines such as IndiGo,
      SpiceJetBSE 1.19 % and JetKonnect heard Gopinath vent his ire. "There was a
      discussion as to how to put up a bottom price (on tickets). One of the
      Deccan CFO who attended one such meeting told me (after Kingfishertook over
      Air Deccan). There is not much difference at the entry-level fares. There is
      only Rs 500 gap between the fares of the LCCs and the full-service airlines.
      FIA is a cartel to fix that price. The low-cost airlines are fooled by the
      full-service airlines to follow that price. The low-cost airlines will have
      to first break that cartel and then only can the market can expand,"
      Gopinath declared.

      The discussion organised by Centre for Asia Pacific Aviation, became heated
      as CEOs of low-cost airlines joined the fray to contest Gopinath's charges.
      As Gopinath raised his pitch on the podium, IndiGo's president Aditya Ghosh,
      a fellow panelist had his hand on his head disapproving his former rival's

      The civil aviation regulator observed in August too that the price
      differential between a full-service airline like Jet and that of IndiGo were
      wafer thin and in fact on some select routes fares charged by low-fare
      airlines like IndiGo were the highest.

      In the past, the ministry of civil aviation and the regulator have both
      intervened separately against steep fare escalations by Indian carriers and
      have issued warnings to airlines asking them to desist from increasing fares
      in tandem. Later this year, the regulator made it mandatory for the airlines
      to disclose price bands. In 2010, there was a move to probe cartelisation
      charges against airlines, but the investigation reached no where.

      Gopinath's comment was made in a larger context of why the low-cost airlines
      have failed to stimulate the market by offering low fares. This failure by
      these airlines has in turn impacted not only the passenger growth but the
      number of fliers that the budget carriers are able to get into their fold.

      "Low fares have to stimulate the market and we need to have not just
      low-cost airlines but low-fare airlines and that is not happening as there
      is a cartel and that is not allowing it to happen," Gopinath said.

      Passenger data shows that there has been a double-digit drop month-on-month
      over the past three months and the market has shrunk by over 5%, because of
      soaring fares.

      Low-cost airlines were quick to jump to their defence. Ghosh, from IndiGo
      was dismissive of any such practice and said it is not impossible to check
      out fares offered by competition today, as any online travel portal will
      give a comparison of highest and lowest fares offered by other airlines in a
      few seconds.

      "Even if it was a cartel, this must be the most inefficient cartel in the
      world that despite a cartel in place, airlines do not make money," Ghosh

      "There is nothing like cartelisation in the market. If cartelisation
      existed, airlines would be making profit. And even if after cartelisation,
      airlines are not making money what's the use of it," argued Neil Mills, CEO,

      Jet Airwaysthat was in the direct line of fire said a cartel would not work
      today as the LCCs have much more capacity than the full-service airlines in
      today's market.

      "By fixing the floor for IndiGo and SpiceJet to not sell below a fixed
      price, how could I manipulate fares now as the combined capacity that both
      these airlines offer is more than the capacity I have. So, it won't work,"
      said Sudheer Raghavan, chief commercial officer, Jet Airways.
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