Sustainable fares needed to ensure viability of airlines: Hardeep Singh Puri

New Delhi: Civil aviation minister Hardeep Singh Puri called for sustainable and rational airfares that would ensure viability of the sector, while adding that it was a free market and the government has no plan to regulate ticket pricing.

“You know the fares between Delhi and Mumbai are lower than what they used to be 20 years ago. Average fares used be Rs 5,100 but it’s Rs 4,600 today. Clearly, something is wrong here. It should also be our responsibility to ensure viability of the airlines,” Puri told ET in an interview.

Puri said airlines were free to decide prices themselves, but the government will follow a policy of ‘administrative encouragement’. He said the Japanese had in the past followed a system of ‘administrative guidance’ and gave the example of the watch industry.

“There were three major watch manufacturers in Japan and they could have done to each other what our carriers are doing to each other today. So, they divided the world into three markets for the three manufacturers and they all prospered,” he said.

‘No Plan to Regulate Fares’

“The approach will not be of administrative guidance here in India but of administrative encouragement. Sometimes, you use a margin of persuasion and just point towards a direction. It’s a relationship of respect between the government and the airlines, and if we make a suggestion of sustainable and rational pricing, airlines would look into it,” he added.

Puri said any plan to raise fares faced a lot of resistance but people need to understand that low fares were not good for the market in the long run. “So, lower prices may be good for consumers today but with this pricing, an airline might make it difficult for other airlines to survive. And once that happens, the airline that survives will start raising fares, which may not be a good situation,” he said.

Airlines blame each other for unsustainable pricing. While the smaller carriers blame the market leader IndiGo for low fares, IndiGo in turn attributes them to the newer entrants.

Unlike the telecom sector, where the regulator has floated a consultation paper on whether there should be a floor or ceiling on tariffs, Puri said there was no such plan for airfares. “One of our low-cost carriers was selling ticket on Delhi-Mumbai sector for as little as Rs 1,100. Somebody suggested that why not put a floor or cap on it. If you put either, airlines would make that floor or cap the norm,” he said.

AIRPORT PRIVATISATION

The government earlier this week released the preliminary information memorandum inviting bids for the privatisation of Air India. The minister said the privatisation programme for the national carrier had attracted interest from a large number of entities, both domestically and internationally. He said its assets, its large market shares both in the domestic market as well as the international market of India, its access rights, its prime slots at international airports, as well as India’s potential as a huge aviation market, all made Air India attractive proposition for suitors.

Puri acknowledged that the last attempt to privatise Air India during the first time of the Modi government was unsuccessful. “Look, I was not the civil aviation minister then. If I had been the aviation minister then, I would not have gone for it,” he said, adding that an undertaking of this kind was better attempted in the beginning of a five-year term, rather than the end of the term, as was done in 2018.

“Lots of things went wrong… Fundamental differences…like we wanted to keep control and keep 24% in the airline. All the analyses that I have seen say this is a great improvement and a much more sweetened offer. My policy level advice to my colleagues in the aviation ministry is to put yourself in the shoe of the buyer and then decide the details,” he said.

When asked about the Swadeshi Jagran Manch’s (SJM) opposition to the AI privatisation programme, Puri said he would have been surprised if that had not happened. “The committee headed by the home minister is capable of dealing with all that. We have to understand we are losing Rs 26 crore on Air India daily. These could be used to provide better facilities to the people of India, in terms of building roads and toilets,” he said. Home minister Amit Shah is heading the Air India Specific Alternative Mechanism that approved the bid document and which is overseeing the sale process.