Economics News Article Review


"India to act over predatory airline pricing",

By Amy Kazmin in New Delhi

India's government has warned domestic airlines that it intends to crack down on "predatory pricing" after carriers sharply increased fares on popular routes during a recent festival, as overall passenger traffic surges.Indian travelers were outraged during the recent festival of Diwali -  Hinduism's biggest gift-giving holiday - when some carriers charged about Rs25,000 ($550) for a last-minute Delhi-Bombay round trip ticket, a route on which fares usually range from Rs10,000-Rs15,000.
Fares on other popular routes also surged during the holiday period, as local airlines sought to cash in on a newly buoyant market. "This predatory pricing can't be allowed to continue," Praful Patel, the civil aviation minister, said at an industry conference in New Delhi on Thursday. "We shall try our best to bring discipline."

Mr Patel said the carriers should have a "price band" for different routes, and warned that the director general of civil aviation, the industry regulator, had "special powers" that could be invoked if airlines did not act appropriately, especially with last minute travelers. The warning comes as India's airline passenger traffic numbers are soaring after the difficulties of 2008, when carriers - which had been growing at about 25 per cent a year for several years - were hit by surging fuel prices, and plummeting passenger traffic.

From January to October, Indian airlines  carried 41.9m domestic passengers, up 18 per cent over the same period last year, and higher than the pre-crisis peak in 2007.
Dinesh Keskar, chairman of Boeing India, said passenger load factors are now about 80-82 per cent, and are likely to be even higher between now and February - the peak season for foreign travel to India. But Indians remain highly price sensitive. About 70 per cent of India's domestic air travel is on low-fare carriers such as Indigo and SpiceJet, and the low-fare arms of full-service private carriers, Jet and Kingfisher. "We are extremely cost sensitive consumers as a culture," said Samyukth Sridharan, SpiceJet's chief commercial officer. "People view aviation as efficient, point-to-point on-time travel." Kingfisher  Airlines,  India's second-largest carrier by market share, said on Thursday it had taken advantage of improving market conditions to reach a deal with lenders to restructure an estimated $1.3bn in outstanding debts. The airline - which is owned by the billionaire liquor baron Vijay Mallya - told the Bombay Stock Exchange it is converting about $445m of debt into equity. The repayment period for the remaining debt would be extended to nine years, with a two-year moratorium.


The article in economics deals with increase airline ticket fares during festive seasons in India. Indian airline industry has grown steadily over the past decade. And the prices have come down to an extent. But, during the festivals, the demand for air travel increases as most Indians would want to spend time with their families. This scenario has been explained well in the solution.

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