Labels (choose what you want to read about)

Monday, November 22, 2010

On Free Markets

Our government doesnt interfere where it should, and meddles in affairs such as these. For the life of me, I cant fathom why the civil aviation ministry should care about rising air ticket prices.

Sanity returns to tarmac as low-cost airlines reduce fares

For the uninitiated, and those too lazy to read the above link, ticket prices for sectors such as Mum-Del zoomed in the recent past. If you bought tickets for 3-4 days away, you would be fine, but within 1-2 days, prices really spiked - particularly noticeably on low cost carriers. Eg: Rs. 20-30,000 for a one way Mum-Del fare. So on for some other sectors as well. Mainly happened due to supply issues (esp. at Mumbai airport) and high demand due to seasonality.

The aviation ministry got really pissed off about the high fares, and gave earfuls to all airlines (now the situation is supposedly back in control - but read on to see why it is not). My question is: why should the civil aviation ministry care? Aviation is a private sector industry, not subsidized by the government in any way, and which caters to the elite. So why should the ministry care?

Now some may want to dispute the elite bit - using two broad arguments:

1. Air travel is increasingly a middle class affair, and should be encouraged
More than 70% * of our country lies below the middle class benchmark. I can somewhat understand the government being bothered about affordability of rail travel, but air travel? Are there no other means available to Mr.-Verma-clothes-shop-merchant if he is only getting Saturday's ticket to Delhi for 22,000 on Friday? Cant he take a train o

2. Air travel is also important for businesses etc
I have this it hunch if you will...that businesses wont be impacted too much by fare spikes which are last-minute AND on weekends AND for low cost carriers. I mean, this is the segment which gave birth to the idea of an expensive business class with 3x-5x fares!

As it so turns out, there appears to be some indication of shady collusive behavior by airlines too, apart from supply-demand mismatches. And by god if that is true then it should be stopped by the regulators and ministers. But thats not the line I see the minister take - its just the same old "consumer-friendly" posturing... "We will not let them increase fares likes that" etc

For once I say, let the free market decide! The current spiky system was good - in the absence of sufficient supply, those who REALLY needed to fly could still get seats at a premium till the very end while others would drop out of their plans / take a train. Now, everyone sees low fares thanks to socialism, but those in urgent need at the last minute will never find those seats! Sigh. and interferes where it should not!

* Figures are for representational purpose only; quite unverified

No comments:

Post a Comment