R Srinivasan

Futile exercise

R Srinivasan | Updated on January 23, 2018 Published on May 22, 2015

Airline cartelisation is tough to prove

It’s summer, and the great Indian travel exodus has begun. This is the time when millions of families set off on holidays or to visit relatives, with almost all of them wanting to leave at around the same time. It’s hardly surprising, therefore, to see trains running chock-a-block, and airfares soaring, well, sky high. Which also sets off the usual cries of price gouging and cartelisation by airlines from customers, who find a ₹3000 fare which was showing around the time they started thinking about travel, has magically transformed to ₹18,000 when they actually go to book.

This time around, BJP MP and consumer rights activist Kirit Somayya has led the charge, complaining to the Competition Commission of India that airlines have hiked fares arbitrarily and in tandem, to take advantage of the desperation of travellers. Similar complaints were filed before the fair trade regulator in 2011, 2012 and 2013. But the case for cartelisation could not be proven. The CCI applied the “dominant position” test to see if some players, by colluding, could fix the market to their advantage, and found that no player was large enough on its own to impose its will on the others.

Besides, cartels must meet the test not just during peak season, but during the off season as well, plus their response to triggers, like a rise in the price of fuel. Also, airline booking engines are hugely technology driven, using real time data analytics to dynamically set fares. Telling where computer algorithms end and collusion begins is pretty much impossible. The only workable solution is to have an independent authority to monitor fares and examine airline cost structures in detail to see if price fixing is happening. Former aviation minister Ajit Singh promised such a body the last time there was an uproar about fares, but that idea appears to have been quietly buried. Or else, the ministry will have to ensure that there’s at least one hungry entrant with deep pockets in the market at any time to keep the rest honest!

Senior Associate Editor

Published on May 22, 2015
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