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Govt to ask airlines to cut fares, boost PLF

Source : BUSINESS_STANDARD
Last Updated: Wed, Dec 12, 2012 04:20 hrs
Construction workers erect scaffolding at the site of metro station as a SpiceJet Airlines aircraft flies past in the southern Indian city of Chennai

Concerned over spiralling fares, the civil aviation ministry, which will launch an airfare monitoring cell next week, has decided to ask domestic carriers to reduce rates and increase passenger load factor (PLF) that has been falling even in peak seasons.

The ministry will meet domestic carriers next week to discuss how the upper limit in each bucket could be reduced to bring down average airfares, which have been rising in the past few months. Airlines would have freedom to vary their rates, but within the decided narrowed-down range.

Under the dynamic airfare policy airlines practise, the fares on a particular day are divided under various buckets, based on an aircraft's capacity, with a definitive lowest to highest range.



Civil Aviation Minister Ajit Singh told Business Standard: "After the unit is formed, we will collect all data on fares and tickets sold under various buckets. We will discuss with airlines how to bring down the upper limit of fares to augment load factors. The upper limit, which should be two-three times the lower range, is 10-11 times at present. The basic intention is to monitor fares closely and make those reasonable and transparent - not to regulate fares."

The average monthly PLF of domestic airlines - the proportion of available seats utilised - is around 72 per cent and the domestic traffic has seen a contraction lately. That has primarily been due to the 20-30 per cent increase in fares over the past year, say civil ministry officials. The total number of passengers in November this year, for instance, dipped 15 per cent from that in the month last year.

A top ministry official said: "The highest seat occupancy any airline (on an average) has been able to achieve is 72 per cent. If 28 per cent seats go vacant, it is a big loss for every airline. We will ask carriers to bring down the fare range to increase occupancy."

While the traffic on domestic routes has fallen, that on global ones has been growing at around eight per cent.

Officials said the ministry had no power to fix airfares but in view of complaints of spiralling fares, it intended to direct carriers to fall in line so that more passengers could enjoy air travel.




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