Check on predatory pricing

The government has moved in to check predatory pricing by domestic carriers. The civil aviation ministry has empowered the Director-General of Civil Aviation (DGCA) to have a final say in the tariffs of all airlines operating in the country.

"Where the Director-General is satisfied that an operator has established excessive or predatory tariff under sub-rule (1) or has indulged in oligopolistic practice, he may, by order, issue directions to such an operator," the new rules say.

Violation of DGCA directives can lead to cancellation of the airline's licence. This means if a carrier slashes tariffs to boost traffic, the DGCA can step in and refuse permission to the cut.

Low-cost, no-frills carriers will be the hardest hit by this new policy.

Moreover, every air service operator in the country will have to provide the government with information regarding its cost of operation, profits and justify the fare charged by it.

Every airline will also have to file with the regulator all information on the tariff structure it seeks to introduce at least 30 days beforehand.

"This will help regulate the sector on issues relating to pricing. Predatory pricing and excessive pricing can lead to major changes in market dynamics. If the regulator feels that the pricing is not correct, it can direct the airline to change the tariff," said a senior civil aviation ministry official.

If an airline offers joint tariffs with other airlines, a separate declaration will have to be filed with the DGCA confirming the applicability of the joint tariff.

"The Director-General may, for reasons to be recorded in writing, reject any tariff so filed under this rule and any tariff so rejected shall be ineffective," the guidelines say.