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SpiceJet CMD Ajay Singh blames IndiGo for below-cost fares

, TNN|
Nov 21, 2019, 11.05 AM IST
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This is ultra competition and we have an extremely strong player in the market (read IndiGo). We need to increase fares to rational levels. Fares will largely be determined by the largest player in the market, Singh said.

Highlights

  • Singh blamed market leader IndiGo, which flies almost one in every two domestic passengers, for the below-cost fares
  • He noted another 'dangerous' trend in Indian airlines’ pricing of fare inversion where ticket prices fall closer to date of travel
(This story originally appeared in on Nov 21, 2019)
NEW DELHI: Indian airlines face an existential crisis due to mounting losses and prohibitive operating costs, much like the country’s telecom players. But unlike the three big telecom players who are trying to avoid any possible shutdown by hiking tariffs, airlines are going deeper into red by charging fares that do not reflect cost. SpiceJet CMD Ajay Singh drew this analogy between the two crisis-ridden sectors on Wednesday, while blaming market leader IndiGo, which flies almost one in every two domestic passengers, for the below-cost fares.

IndiGo CEO Ronojoy Dutta, on the other hand, last week had told TOI that no single Indian airline, including itself, has pricing power which is solely determined by how full the planes are.

“There are lot of parallels here. In airlines, we have a large monopolistic player (IndiGo like Jio in telecom) driving down fares in general; a struggling public sector player that the government is supporting (Air India, like BSNLVSNL) and a low fare, high taxation and highly regulated environment for these two sectors. So we have to ensure there will be lessons learnt from aviation to avoid more casualties (after Kingfisher and Jet),” Singh said.

While constantly complaining of ultra high operating cost — fuel for domestic flights being costliest in India — and fares that do not cover costs leading to losses, all big and emerging Indian carriers (except divestment-bound Air India) are adding planes at a furious pace. Then to fill them up, they offer low fares.

Asked why don’t airlines regulate augmenting capacity and charge fares that cover costs, Singh said: “This is ultra competition and we have an extremely strong player in the market (read IndiGo). We need to increase fares to rational levels. Fares will largely be determined by the largest player in the market. Others will, will have to follow. The largest responsibility is of the largest player.”

Singh noted another “dangerous” trend in Indian airlines’ pricing of fare inversion where ticket prices fall closer to date of travel. This, he said, goes against the basic concept of people buying early to get low fares and airlines getting cash flow. “This fare inversion did not persist. But it happened and that is very dangerous of Indian aviation,” Singh said.

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