Kochi: The Central government informed the Kerala High Court that airlines have the freedom to determine airfares based on their operational viability, and it does not intervene in the commercial aspects or fixing of airfare by the airlines.
According to an affidavit submitted, the government said that dynamic pricing, a practice adopted by airlines, is a global phenomenon. The fluctuation in prices is determined by algorithms considering factors such as competitor pricing, supply and demand, and other external elements. “Airlines are free to charge airfares as per their operational viability. The government does not interfere either in commercial aspects of airline nor fixing of airfare by them,” the affidavit read.
Here’s what Centre say on fare hikes by airlines
The central government, in response to a petition filed by Zainuabideen challenging fare hikes by airlines in the Gulf sector during festival seasons, argued that dynamic pricing is essential for airlines to enhance their revenue per flight.
The government stated that airlines are obligated to determine reasonable tariffs, considering various factors such as operational costs, service characteristics, reasonable profit, and the prevailing tariff, under Rule 135 of the Aircraft Rules, 1937.
It is also relevant to mention that the airlines adopt dynamic pricing which is a global practice by changing prices often depending on the day of the week, time of the day and number of days before the flight factoring in different components such as, how many seats a flight has, departure time, and average cancellations on similar flights, the affidavit said.
“Dynamic pricing is a global pricing strategy in which highly flexible prices for products or services based on current market demands. Businesses are able to stay competitive by changing prices based on algorithms that take into account competitor pricing, supply and demand and other external factors,” it noted.
According to the government, a passenger who makes a booking closer to the date of travel may not get the lower fares as the inventory earmarked for these lower fares may have already been booked. It added that in an emergency situation, the union government does not “remain mute spectator”.
“Airline ticket prices are determined by the demand and supply theory and are governed under the competition laws (Competition Act,) any anti-competitive practice by airlines is kept in check by the Competition Commission of India (CCI), which ensures to eliminate practices having adverse effect on competition, promote and sustain competition and protect the interests of consumers in India,” it said.
The union government also submitted before the court that the airfares internationally have remained firm on account of various factors like “opening of markets after the COVID pandemic and the resultant surge in demand, rise if ATF prices globally, supply chain disruptions on account of both COVID and Ukraine-Russia conflict etc.”
(With PTI inputs)