After the judges perused the Section 135 (4) of the Aircraft Rules, which clearly stipulated the requirement of airlines to submit their tariff plans to the DGCA entitling the regulator to interfere with such plans and take actions, the Supreme Court bench said the DGCA was expected to act more than just a stamping office for airlines and is authorized to regulate air fare.

'It can certainly interfere with the tariffs whenever found predatory and excessive. But DGCA wants to play safe and wash its hands off the liability towards gullible passengers by saying its role is limited to safety and licensing aspects,' said the bench. The court lamented that it seemed the DGCA was bothered only about the carriers.

Industry regulators are expected first to protect the interest of consumers against any monopolistic or oligopolistic exploitation by the concerned industry while ensuring growth, stability and competitiveness of the specific business, which it is independently empowered to regulate. The DGCA seems to be doing just the reverse ever since the process of deregulation of the civil aviation sector began two decades ago. The recent charges against several senior DGCA executives, including faking flying certificates for their kin, trying to protect sinking air-carriers even at the cost of air safety, grounding of aircraft at will by airlines and turning blind to regressive airport development fees charged from passengers, say it all.

The DGCA, it would appear, has become the single biggest stumbling block to cheaper domestic air travel. Recently, it went to the extent of preventing even efficient domestic air carriers from cutting fares to protect the inefficient. After the budget carrier SpiceJet announced last month a scheme offering one million tickets for Rs. 2013 each, the aviation regulator issued an order to ensure that other airlines did not follow the practice with similar fare discount schemes. The DGCA’s order was not only most deplorable, but also nailed its lie before the Supreme Court that the regulator had no role in fixation of airfares. Under pressure from the public and criticism from MPs, representing both the Opposition and ruling UPA, the DGCA issued a circular on December 17, last, prohibiting all airlines from levying transaction fee – paid by an airline to a travel agent – without bothering about its compliance. It has also been mum on the question of the levy of ‘user development fee’ on passengers.

Under these circumstances, it was not at all surprising that the DGCA went to the extent of contacting all the CEOs of domestic airlines in the evening of January 11, the day SpiceJet announced the three-day fare discount scheme for a limited number tickets, advising them against succumbing to the passenger poaching trend. SpiceJet and IndiGo are two highly efficient and profit making airlines on the domestic route. High airfares all through 1012, following the grounding of Kingfisher Airlines, helped them make even higher profits. The industry as a whole was a loser as high airfares drove away millions of casual and low budget travelers to opt for cheaper inter-state luxury buses and high-speed trains. Last year, the domestic air traffic growth showed the biggest ever decline in the last 10 years.

Latest figures show Kalanithi Maran-owned low-cost carrier SpiceJet swung back to profit during the October-December quarter with a net profit of Rs 102 crore, mainly due to an improvement in airfares coupled with higher market share. Rahul Bhatia-led IndiGo is expected to make a record profit during the current financial, topping the Rs. 700-crore mark. Jet Airways have returned to the profit path. Unfortunately, Air-India, stricken with six grounded Boeing 787s ‘Dreamliner’, is still bleeding mainly under its huge debt burden, amounting to Rs. 43,777 crore as at December 31, last.

Compared with international airfares, India’s domestic airfares are among the highest in the world. The losses incurred by airlines serving the domestic routes have little to do with airfares. They have more to do with mismanagement and financial profligacy. Before going to public to collect huge sums at premium from aspiring shareholders, including financial institutions, the promoters of all those airlines painted rosy pictures of their operations, which were even certified by their bankers and independent assessors. The operating conditions post-public offering of shares did not change any significantly to alter their actual financial performance projections. Until 2012, the industry showed a phenomenal demand growth. The management focus, however, seemed to change. Organisational and financial mismanagement, including increasing borrowings, fictitious billing, expenditure rigging and siphoning-out of funds, might have led to the collapse of several of them while the regulator, DGCA, remained a mute spectator.

The DGCA told the Supreme Court that it was not mandated to fiddle with fares. It could be partly true. The eight-point chart of DGCA’s functions and responsibilities does not specifically list such a mandate although it is implied to do so under the function of ‘regulation and control of air transport operations’. The DGCA is the statutory authority responsible for laying down standards and their implementation covering: (a) airworthiness; (b) safety and operation of aircraft; (c) flight crew standards and training; and (d) air transport operations. The other mandates are: licensing of flight crew, aircraft engineers and civil aerodromes; certification of aircraft operators; investigation into incidents and minor accidents; regulation and control of air transport operations; formulation of aviation legislation; R&D activities; and handling of matters relating to the International Civil Aviation Organisation (ICAO).

But, it has been fiddling with airfare when it suits the regulator, or under pressure from the government and the public.

Two years ago, the DGCA had set up a fare-monitoring cell. It was asked to probe high airfares in September 2011. Last year, the Competition Commission raised concerns over airfare cartelisation by domestic operators. The industry regulator is yet to act to discipline the air carriers. Balance sheet losses due to mismanagement alone can’t be allowed as an alibi to fleece consumers. The DGCA must set operational parameters for airlines companies to protect consumers from paying for management inefficiencies. (IPA Service)