Govt must not dictate air fares: Mallya

Protesting against the government efforts to reduce high prices charged by airlines on tickets booked at short-term notice, Kingfisher Airlines promoter Vijay Mallya on Monday said that airfares should not be capped by the regulatory authorities, whether it is in upper or lower band.

"There is no case of capping airfare in a liberalised environment, be it at upper or lower band. It is a function of demand and supply," Mallya told reporters on the sidelines of a Ficci conference.

"It is not exploitation by the airlines. Airlines are fighting for market share, so demand and supply has to be respected," he said, adding, "Media is sensationalising the fare issue."

Official sources tell that the airfares charged by the domestic airline companies have come down by 20-25 per cent after the 'pressure' mounted by the Union civil aviation ministry and Directorate General of Civil Aviation against exorbitant airfares.

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In the last few weeks, Civil Aviation Minister Praful Patel and the aviation regulator DGCA have warned that action would be taken if the errant airlines did not roll back the abrupt hike in air fares.

On Saturday, Director General of Civil Aviation E K Bharat Bhushan had a meeting with the representatives of the low-cost carriers SpiceJet, IndiGo and Go Air on the issue.

This week, he is likely to meet representatives of full service airlines -- Air India, Jet Airways and Kingfisher Airlines -- for discussions.

At present, the air fare range on Delhi-Mumbai sector is between Rs 5,000 and Rs 20,000 on economy class ticket, while on Delhi-Chennai and Delhi-Kolkata sector, it is between Rs 5,000 and Rs 15,000.

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Post-Diwali, the air fares, especially the last-minute or spot tickets, had skyrocketed. Two weeks ago, the lowest fare for the last-minute tickets booked at Delhi-Mumbai route was about Rs 17,000, even though holiday travel season had not begun.

This is in contrast to the lowest available fares of about Rs 3,000 for Delhi-Mumbai and Rs 4,000 for the Delhi-Chennai and Delhi-Kolkata route during the same period last year.

The proposal of airliners to fix ticket fares based on four distance slabs of less than 750 km, 750-1,000 km, 1,000-1,400 km and beyond 1,400 km, was rejected by the Union civil aviation ministry last week.

According to this proposal, a passenger buying an economy class ticket closer to the travel date would have to shell out Rs 10,500 for a Delhi-Chandigarh or Chennai-Coimbatore flight and anything up to Rs 40,000 on the Delhi-Bangalore or Delhi-Kolkata route.

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The airlines have 'bucket fares', which means that there are certain number of seats reserved in each flight at low fares that can be booked much in advance.

As soon as these seats are filled, the fare for tickets booked closer to the date of travel, increases progressively towards a higher bucket.

Mallya said that to resolve the air fare issue, government should look into the taxation issues as the jet fuel costs in India are 60 per cent higher than in Dubai or Singapore.

"We need declared goods status for ATF (air turbine fuel). The savings (from lower taxes) will be passed on to the consumers," he said.

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At present, VAT on ATF in some states is as high as 30 per cent, while commodities brought under declared goods status by the Central Government have to pay a uniform VAT of 4 per cent across the country.

Mallya also talked about the fund raising plans of Kingfisher through global depository receipts, which he said, will be launched in January.

The airline had earlier announced its plans to raise $250-300 million from the global markets. It had also said that its Board has approved the debt recast package, under which lenders' debt of up to Rs 1,355-crore (Rs 13.55 billion) will be converted into share capital.