Aviation sector has grown due to low fares: Praful Patel

Expressing concern over exorbitant fares charged by airlines, civil aviation minister Praful Patel today said the aviation industry should keep in mind that the phenomenal growth in the sector has been due to the low fares offered earlier.

"For five years, the aviation sector has grown on the back of low fares. We can't ignore this fact. The benefits of low fares have gone to the travelling public," he told Press Trust of India days after warning the airlines that the government "cannot be a mute spectator" to the exorbitant last-minute fares they were charging.

He said the government wanted to be "open and transparent, but not interfering. It does not want to see either inconvenience to passengers or an unhealthy industry. It has to be a judicious mix of the two."

Patel's comments came days after the Ministry and the Directorate General of Civil Aviation (DGCA) asked domestic carriers to reduce spot fares (last-minute fares) and maintain transparency so that passengers were aware of the price they would pay if they travel on a route on a given date.

"Our concern is two-fold - one that the fare structure is transparent and simple so that one knows what is the cost when one buys a ticket, and there are no hidden costs. The other concern is that the absolutely exorbitant spot fares. Such exorbitant fares are not acceptable to the government," he said answering questions.

He, however, made it clear that "we are not fixing the fares. We cannot decide airfares in a de-regulated sector. We don't wish to get into this area as airfares are driven by competition."

Patel said the spot fares were substantially hiked by airlines during and after Diwali as there was "a temporary mismatch between demand and supply."

Maintaining that the new Tariff Monitoring Unit (TMU) set up in the DGCA would not intervene in fare fixing, he said it would examine the fares and advise the government especially when the fares are very high.

"We also do not encourage predatory fares that encourage unhealthy competition and jeopardise the prospects of the industry," the minister said, making it clear that the TMU would only guide the DGCA and the government when fares are very high or low.

Though the airlines have lowered spot fares to an extent, their global body International Air Transport Association (IATA) has opposed government intervention in airfares.

"I don't think the government should have stepped in ...Market forces should determine air fares. In recent years, competition had driven down fares to a point where airlines were making no money. Such a situation cannot go on forever," IATA's chief economist Brian Pearce said in Geneva yesterday.

If government intervenes too much, then it could lead to a situation like in Europe where increased taxation has pushed travel costs up by 3-4%, resulting in fewer people flying, he cautioned.