Will ‘basic’ airfares really be kept low?

The cost of flying is going to go up. The latest round of deregulation for airlines may be couched in terms of passengers having to pay more for ancillary services like preferred seating, numerous checked bags, meals, etc, but the net effect will be that costs will go up for anyone privileged enough to be able to fly in this country. There is also the promise that falling international oil prices could mean airlines themselves get more profitable if the trend continues. The idea that revenues from ancillary services could lead to airlines keeping basic fares competitive may, however, turn out to be just a myth. There is no altruism in business, most of all in high-cost aviation, which has seen the national carrier survive only on large dollops of cash subsidies from the government while a couple of private airlines, including high-profile Kingfisher, have gone bottoms up. It’s ironical that while airlines in the West are being hit by recession, India’s aviation industry is not yet robust enough to keep pulling in passengers and cargo, with AAI’s website showing a slight drop on both counts in comparison to the previous year (2011-12), while there has been an increase in the number of flights. The heavy cost of modernisation of the country’s major airports is also being passed on to flyers, which means that the air passenger is the one most hit by the spiralling expenses of modern living. Airlines in India are also looking further afield so far as investors are concerned, with major players like Jet Airways roping in an equity partner from overseas. From the emerging trends in the past decade or so it is clear that low-cost airlines are proving to be more competitive than the established players with large networks. Also, competition in the skies is all set to hot up with the arrival of Air Asia. It would appear then that these are exciting times for air travel except for the fact that it’s never going to be as cheap as before for the passenger. Given the crush on capacity on the nationwide railway network with demand always millions ahead of seats and berths, the airlines should technically be able to compete thanks to considerable deregulation in terms of operations, although airline margins remain wafer-thin as the DGCA itself admits. By allowing the unbundling of a host of services, the regulator has given airlines the same level field that exists internationally; and now it’s entirely up to the airlines to balance the need to be able to keep selling seats to price-sensitive passenger with the novelty of being able to up their bottomline by hitting the discerning flyer a little more in the pocket.