Page 6 - IACC Newsletter March-April 2014 Issue 03

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Air travel for the aam aadmi
Fares will drop with competition. There is no reason to fear foreign airlines.
-By Dr. LALIT BHASIN
Back in 2005 when India’s first budget airlines were taking wing, this was a common sight at airports: Swarms of local
travellers clicking their way to the first airplane journey of their lives, or thrifty Indian families unpacking home-cooked
food onboard in scenes that one might see on a train journey in India. The early offerings from low cost, no- frills airlines
revolutionized air travel, so much so that if one got lucky online, tickets could even be cheaper than the to and fro airport
taxi fare.
Good times they were, until three years back. Thereafter, high fuel costs, taxes and a general mismanagement of air
routes quickly pushed up fares. To be sure, economic prosperity has boosted air travel in India at a fast clip. Yet, with
average airline tickets now costing way above erstwhile full- service fares, the budget traveller in India has been priced out
of the skies.
But can this change? Is the Indian airline industry capable of transforming itself from serving a tiny fraction of the 1.2
billion population to becoming the mode of choice for long- distance travel for the entire country? Simply put, can more
train- travelling Indians fly? The answer is yes, and they must because a well- established air transport industry plays a
role in facilitating growth in a nation’s standard of living and economic activity.
Benefits of competition
About a decade and half ago, it cost about Rs. 16 to make a local mobile phone call in India. A liberalized telecom policy
led to fierce competition among mobile operators. Today, India has about 900 million mobile phone connections and the
average tariff has plummeted to half a rupee.
The learning’s from many other sectors are similar, including the automobile and banking industries. When private banks
were allowed in India many cried foul on the grounds of unfair competition. In the end, the Indian consumer has only
benefited, enjoying wider choices and price affordability.
Today, an average one- way plane ticket between New Delhi and Mumbai is priced at about Rs. 6,000, with a flying time
of about two hours. The same distance is covered by train in 16 hours at a third of the cost. Adjusted for per capita
income, the choice of rail travel is rational for an average Indian consumer travelling with a family of four, because the
total savings exceeds the amount of income which could be earned in that time.
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