Civil Aviation Authority

"We will look into the interest of the aam admi and there will be no exorbitant fares," civil aviation minister Praful Patel said.

The airlines' proposal, made to sector regulator Directorate-General of Civil Aviation (DGCA), relates to peak fares — which apply only if tickets are bought on the day of travel or the day before.

"The DGCA is looking into the matter. If a proposal has come, it doesn't necessarily mean it will be approved," Patel said. He added that the DGCA had issued notices to the airlines over the exorbitant upper-band fares they had proposed.

Under the airlines' proposal, the peak fare ranges between Rs 10,500 and Rs 40,000 over four distance bands: up to 750km; 750-1,000km; 1,000-1,400km and above 1,400 km.

The peak-fare band proposed for the 750-1,000km slab ranges between Rs 14,550 and Rs 19,500; while it is Rs 17,000 to Rs 25,000 for the next slab.

DGCA officials said the proposed fares were likely to be dismissed out of hand and airlines asked to "come to their senses".

If the airlines persisted in trying to raise fares, civil aviation officials said, "relevant authorities could well initiate probes and action against what we may view as cartel-like action".

The officials warned that licences could be given to new airlines to operate on Metro routes to break any "cartel-like situation". Allowing new players in telecom has led to lowering of tariffs.

Analysts said the proposed rates were too high and would make business unviable for most airlines, especially the low-cost ones.

"On major routes, high peak fares would result in traffic moving to the railways," said Robin Pathak, former Indian Airlines director and aviation sector analyst.

Airlines pointed out that the proposed price bands were only for peak fares. "The average price is much lower if the tickets are bought in advance," an airline official said.

For instance, if you now book a ticket for December 23 on a New Delhi-Calcutta flight, the price can be as low as Rs 4,030 on a low-cost airline. A ticket for tomorrow's flight could, however, cost around Rs 17,000.

The country's domestic airlines — including IndiGo Airlines SpiceJet, Jet Airways Konnect, JetLite, GoAir and Air India — have submitted the peak price bands in response to a DGCA directive last month to provide fare information on the first of each month.

The DGCA had issued its circular after fares on some routes, like Delhi-Mumbai, shot up by 300 per cent in November because of a demand-supply mismatch. The circular asked each airline to "furnish a copy of the route-wise tariff across its network in various fare categories... on the first day of every calendar month".

Pradeep Baijal, head of the Federation of Indian Airlines, said: "FIA does not discuss fares.... Fares are decided by individual airlines." Jet Airways refused comment on the proposed fare hikes while other airlines sought time to react.

Aviation sector analyst Sudipto Sen said: "Airlines have been ratcheting up fares in response to increasing demands.... However, we estimate that once Air India, Indigo, SpiceJet and Jet manage to get deliveries of ordered planes, there could be over-capacity on many routes, sharply bringing down the fares."

Government of India has warned airlines against any further hike in airfare. The airlines in India have come out with the proposal to increase the prices after they were asked to submit their planned price bands. As per the proposal sent to the aviation ministry and the DGCA (Directorate General of Civil Aviation), the airfares might see a hike up to 300% from the current level.

According to the new proposal by the airlines, the distance upto 750 KM could cost upto Rs. 18,500, Rs. 19,500 for the distance between 750 KM – 1000 KM and for above 14000 KM the fares could go up to Rs. 40,000. This makes it cheaper to fly to London or Paris from Delhi than to fly to Mumbai. The main reason which has been attributed to this step is that airlines are taking advantage of the massive demand supply crunch in the aviation sector.

Before the proposal submission in December 2010, the fares of some of the airlines went upto 25% during Diwali season in November 2010 and government wants to make sure that this does not happen during the Christmas season again. On the other hand airlines contend that there was a huge drop in flight and seat availability during the year 2008 and 2009. The domestic airlines were flying abroad at the cost of cutting their number of domestic flights because of the shortages of aircrafts.

This happened as during the recession times, the airlines could not borrow the aircrafts. The Aviation Turbine Fuel (ATF) prices also increased during the recession period which worsened the profit figures of the airlines. The key players in the industry such as Air India, Kingfisher Airlines and Jet Airways suffered huge losses during the FY 2009-10. Air India reported a loss of Rs 5,551 crore in 2009-10, whereas Kingfisher and Jet has registered losses of Rs.419 crore and Rs.406.7 crore respectively for the second quarter of the 2009-2010.

Now when the recession period is over, airlines are covering up the losses incurred by increasing the airfares. The way to cover the losses differs from airline to airline. Some airlines are in real hurry to cover up the losses by increasing the prices rapidly and are charging more that what the other carriers are charging. While other airlines charge high fares for last minute bookings.

India has been found to be fully compliant with the international safety standards by an audit done by the Federal Aviation Administration (FAA) of the United States of America. Before permitting a foreign airline to operate in the USA, FAA of US, backed by the US legislation conducts an audit of the concerned country’s Civil Aviation Authority (CAA)/ DGCA to ensure its capability for providing safety certification and continuing oversight on its international carriers. The audit is conducted under an ‘International Aviation Safety Assessment Programme’ (IASA) and focuses on the country's ability to adhere to standards and recommended practices of International Civil Aviation Organisation (ICAO) for aircraft operations and maintenance.

Under the IASA programme, FAA in the year 1997 had conducted an audit of DGCA India and had awarded Category 1 status to India. This year, in March 2009, FAA, based on the report of an audit conducted by ICAO in October 2006, conducted a reassessment of DGCA. While the FAA’s IASA team found India to be compliant in areas of aviation legislation, operating regulations, civil aviation structure and safety oversight functions, and licensing and certification obligations, it raised concerns in the areas of adequate technical guidance for DGCA inspectors, hiring and retaining technical personnel in DGCA, establishment of an on-going surveillance programme of air operators and the resolution of identified safety issues. DGCA was required to rectify the concerns in the identified areas in a short time frame of about five months. Repercussions of non-action could have resulted in India being downgraded to Category 2 status from the Category 1, which has been held by India since 1997.

Under Category 2, no expansion/ changes to the services of Indian air carriers would have been permitted by USA and the existing operations would have been subjected to ‘heightened FAA surveillance’. Such a downgrade would not only have resulted to an economic impact to the nation but would also have been a setback to India’s image worldwide in ICAO, EU, USA and in the international aviation community. The FAA IASA team revisited DGCA on 23rd September 2009, to confirm and validate the action taken on the concerns since the audit in March 2009. The visit was also made to ascertain the information which were provided to FAA by DGCA from time to time in the previous few months on the progress made to make good the deficiencies. During the discussions, the FAA team confirmed the action taken by DGCA to make good the identified concerns of the earlier March 2009 audit.

The team confirmed DGCA meeting the international standards in the area of aviation law and regulations and confirmed that the powers of Director General were well laid down in the various parts of the Aircraft Act, 1934 and Aircraft Rules, 1937 and the regulations were available to all users. In the area of CAA Structure and safety oversight functions, the team acknowledged that lack of financial resources is not a constraint for DGCA and that there has been an eight-fold increase in the annual budget for DGCA this year.

In 2009-10, DGCA has 40 crores under Plan and Rs 22 crores under non-plan. FAA was informed by DGCA that a feasibility study for establishment of Civil Aviation Authority has been commissioned and will commence in October 2009. The FAA team was shown the technical guidance, which was prepared in areas of operations, airworthiness and enforcement for the guidance and use of safety inspectors of DGCA for day-to-day functioning including the training provided to the inspectors on their use.

The availability of an increased number of flight operations inspectors on board with DGCA which now includes 14 full time Government Flight Operations Inspectors (FOI) and 18 FOIs on secondment from industry was shown to the FAA team as against the previous of only four FOIs in March 2009. It was emphasized to the team that current increased salary levels based on the 6th Pay Commission has increased the attractiveness of Government positions and retention has improved.

Government has approved and revised about 560 technical positions and 150 non-technical positions in addition to existing 160 technical and 177 non-technical positions. Aggressive action plan for recruitment is under way. 72 technical officers are being hired in September – October on short term contract. Higher level of financial delegation given to the DGCA by Government of India. DGCA has inturn delegated financial powers to regional offices. DGCA now has 13 directortes as against exiting 9. Four new directorates have been added. A DGCA wide internal and external training programme has been developed.

Further, a big project of IT led solutions in DGCA is in advanced stage of action. DGCA India fulfils all international standards regarding Licensing and Certification Obligations. The DGCA-wide surveillance program was shared with the team and it was emphasized that all airlines including foreign airlines are included in the surveillance programme which is under aggressive implementation.

The programme of surveillance includes Indian registered as well as aircraft taken by Indian operators on wet lease. The current programme for 2009 includes 4,327 surveillance activities, of which 2545 have been conducted till August 2009. The system for addressing deficiencies arising out of the surveillance was discussed. The team was informed of setting up of Surveillance and Enforcement Division (SMED) and the Board for Aviation Safety (BFAS) in headquarters for monthly monitoring of identified Level I deficiencies and progress of other deficiencies. 87 enforcement actions have been taken against personnel and operators.

In addition to the surveillance programme, DGCA has put in a System of Quality Check of foreign flying training facilities used by Indian students for obtaining pilot licenses. DGCA officers have recently conducted an inspection of foreign flying institute in Philippines in consultation with their civil aviation authority. A system of recently introduced financial surveillance of airlines was also discussed based on the current economic slowdown and consequent pressures on the airlines. The revised Schedule VI of the Aircraft Rules 1937on Penalties was shared with the team where substantial increase in financial penalty for non-adherence to regulations has been addressed. DGCA Enforcement Policy and Procedures Manual was provided to the team which was issued on 20 May, 2009 and effective from 15 June 2009.

The Manual establishes and publicizes internal deadlines for taking action, appeal actions, and monitoring compliance with enforcement decisions throughout the regions, and implements an effective internal staff process to ensure timely action. The DGCA Officers at headquarters and in the regions have been trained on the manual. Stakeholders are aware that they are subject to enforcement, and the program constitutes an effective deterrent. FAA team was suitably impressed with the amount of work accomplished by DGCA India. FAA stated that complete action and correction of concerns raised by FAA was done in the available time space which is considered rare in the history of IASA. FAA also acknowledged the commitment and support of Ministry of Civil Aviation and Government of India.