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Air Fares Fixed By Airlines, No Governmental Control: Centre Tells Kerala Court

The Center informed the Kerala High Court on Friday that it does not meddle in the airline’s commercial operations or set airfares, and that airlines are free to set their own rates based on operational viability.
The union government claimed in an affidavit that the airlines’ use of dynamic pricing was a widespread practice and that price adjustments are made using algorithms that consider supply and demand, rival pricing, and other outside variables.

“Aviation prices are set by airlines based on their ability to remain profitable. The affidavit stated that the government “does not interfere either in the commercial aspects of airline or in their fixing of airfare.”

The central government stated that dynamic pricing is a key factor in determining how airlines increase their revenue per flight in response to a plea filed by a man named Zainuabideen, who was protesting the Gulf sector airlines’ increase in fares during festival seasons.

It stated that the airlines must determine the reasonable tariff in accordance with Rule 135 of the Aircraft Rules, 1937, taking into account all pertinent variables, such as operating costs, service requirements, reasonable profit margins, and the tariff that is typically in effect.

It is also pertinent to note that airlines use dynamic pricing, a worldwide practice that involves frequently altering prices based on the day of the week, the time of day, and the number of days before the flight. The affidavit stated that these changes take into account various factors, including the number of seats on the flight, the departure time, and the average number of cancellations on similar flights.

“A global pricing strategy known as dynamic pricing sets extremely flexible prices for goods or services in response to market demands at any given time. Companies can maintain their competitiveness by adjusting prices in response to supply and demand, rival pricing, and other outside variables, according to the report.

The government claims that if a traveler books closer to the departure date, they might not be able to take advantage of the reduced prices because the inventory designated for these fares might already be reserved.

It further stated that the union government does not “remain mute spectator” in an emergency.

“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 stated.

The union government further argued in court that a number of factors, including the “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.” were responsible for the continued stability of international airfares.

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