‘People sit in 5-star hotels, fix air fares’

Capt GR Gopinath sparked off India’s low-cost aviation revolution when he launched India’s first no-frills airline Air Deccan in 2003. Today, with fares rising to as high as Rs40,000, are we seeing the end of the low-cost aviation era? The pioneer spoke to Praveena Sharma on what ails the sector and why low-cost aviation has crashed in India. Excerpts:

On the civil aviation ministry’s action seeking details of fares from airlines
What the ministry has done is good, but it will only bring some transparency to the system — it won’t rein in the airlines for good. What we have to do is strengthen the Competition Commission, endow it with punitive powers to prosecute both criminally and civilly to prevent cartelisation and price fixing. This is required even for infrastructure providers such as airport operators which have become monopolies. We do have an airport regulator but it is not effective because it regulates competition, not monopolies… it just regulates airport charges.

On the role of airport operators in high fares
Airport monopolies are also responsible for high fares. We need to have alternative airports in large cities so that they can compete and prices will automatically come down. We need privatisation without cartelisation, at airports and at the airlines level. We need policies that ensure that there is enough capacity and competition at all times.

On the lack of laws to tackle cartelisation
The whole thing is this: whenever there is a situation of cartelisation or monopoly, there are no effective laws to tackle them. There is a law against black marketing, which puts the offender in jail. There is the Essential Service Maintenance Act (Esma), which puts hoarders in jail. Patel means well but he can’t do much. He can only advise and ask the airlines to put the fares on the website but not much beyond that.

On the need for a anti-trust law like in the US
The only way to control predatory fares is to have a very strong Antitrust law like in the US, where giants like Microsoft, Intel and Google have been probed for their business practices and fined. We also need to have a Competition Commission with legal teeth to discourage cartelisation and prevent people from sitting in five star hotels and fixing prices. Any such offence should attract a jail sentence. It should instill the fear of God in people who commit such crimes.
 
On price-fixing by airlines and new operator licences
It is obvious that airlines have been fixing prices. You do not need a legal expert to detect that. You go to any website to buy air tickets and the base fares of all airlines are the same. Such price fixing should attract both criminal and civil punishment of jail and fine. You also need to have the right policy in place to see that there is privatisation without monopoly. It should ensure there is enough capacity and competition. The government should not get involved in finding a solution to  the indebtedness of airlines. Why should the government be bothered about Kingfisher having huge debts and be involved with its problem?

On the need for more airlines
The government has not issued fresh airline licences in a long time. It is not saying it will not give any more licences but it has made it difficult for companies to get a schedule airline operator’s licence. Today, there are 400 television channels and most of them are not making money but the government is not bothered about that and continues to issue licenses for new channels. Just like in the automobile sector, even though there are so many car companies, the government is still issuing new carmaker licences. The government needs to do that in the case of airlines, too.

On capacity shortage, and regulating airport charges
There is a shortage of capacity in the market because of inadequate infrastructure. Mumbai airport, which is one of busiest, can’t have any more flights. There is an urgent need for an alternate airport in Mumbai. It will automatically bring down fares. There is monopoly in airports too and that has led to ground-handling charges going up by 30-35% in a very short time. These airport charges also need to be regulated.