DGCA meddling

There is no justification for the Directorate General of Civil Aviation (DGCA) demanding the withdrawal of a discount scheme for passengers offered by low-budget carrier SpiceJet.

 The carrier had announced cheap fares for travel from July 1 onwards for those booking tickets during a three-day sale period.

  This was on some specified routes for a certain percentage of seats. The DGCA has viewed this as a “malpractice and a predatory action” as it thinks it is not right to offer a service to customers below the cost price. It has felt that such discount offers would distort the market. Another argument is that the offer would mislead the customers as it is only for a limited number of seats. But none of these arguments stands scrutiny. It is a common practice among companies to offer discounted prices for goods and services to attract customers and expand their market share, especially in the consumer sector. Special festival and holiday offers and clearance sales are frequently resorted to within the country and outside. Airlines everywhere have such schemes. They need only to be considered as a part of the dynamic pricing model which is an accepted practice in the transport sector.

 The DGCA should not be worried about the financial impact of the scheme on the company because the company should be more concerned about it. Even in monopoly sectors like the railways, the fares do not reflect the full cost of operations because of various reasons. This may have invited criticism because public money is involved, but in the competitive private sector the situation is different. Airline companies offer such discounts to avoid the loss caused by vacant seats and even as an investment that will give returns in future. In the SpiceJet case, there was also no scope for misleading the customers because the conditions of sale were made public by the company. 

If there was unfair competition, other airline companies would have complained and taken up the matter with the authorities. Instead, they also announced discount offers in response to the SpiceJet announcement. Instead of meddling in the business plans of airline companies, the DGCA, as a regulatory authority, should be paying more attention to its more serious tasks like ensuring safety and security standards in aviation. In a competitive market, companies are free to prosper or perish. Regulatory bodies should not curb them as long as their business tactics are not illegal and unfair.