2
AIR INDIA - FARE
ASPECr
(MINISTRY OF CIVIL AVIATION)
SECOND REPORT
COMMITtEE
ON PUBLIC UNDERTAKINGS
(1990-91)
(NINTH LOK SABHA)
AIR INDIA - FARE ASPECT
(Ministry
of
ClvU
A vlalion)
[Action Taken
by
the Government on the recommendations contained in the
Slit
Report
of
Committee on Public
Undertaldnp
(Eiahth
LolL
Sabha»)
I
--
Presented to
Lok
SabhQ
on
2.
;
Laid in Rajya
SabhQ
on
lOK
SABHA
SECRETAlUAT
NEW
DELHI
July. 1990ISravana.
1912
(Saka)
) \
L"
,
C.P.U.
No.
669
Price: RI.
15.00
<C>
lCJlXl
LOK
SADIIA
SECRETARIAT
Publilihed
under Rule
382
of
the Rulcs
of
Procedurc and Conduct of
BUliinCliS
in
tok
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by
Manager. Photo
Litho
Unit. Govt.
of
India
PrCli5.
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Corrigenda
to 2nd Action
of
C.F.U.(1990-_~1)
Taken
Report
Page
Para
L:he
fur
Read
~
2
5
1
thier
their
6
2
7
17
.:8~
17.:0%
9
2
8
rare
fare
22
Below
the
chapter
Heading,
insert
the
'AOrd
'NIL'.
CONTENTS
CoMPOSmON
OF TIlE Cm.,MIT1'EE
INTRODUcnON
CHAPTER
-I
CHAPTER-II
CIIAI'TER-III
CHAPTER-IV
CIIAPTER-V
I
II
Report
RecOmmendations that have been accepted
~
the Govt.
Recommendations which the Committee do
not desire to pursue in
view
of the Govern-
ment's replies.
Recommendations
in
respect of
which
replies
of
the Government have not been accepted
by
the Committee.
Recommendations
in
respect of
which
final
replies
of
the Government are still awaited.
ApPENDICES
Minutes of the 3rd sitting of the Committee
on Public Undertakings
(1990-91)
held
on
12th June.
1990
Analysis of action taken
by
the Government
on the recommendations contained
in
the
Fifty-first Report
of
Committee
on
Public
Undertakings (Eighth
Loll:
Sabha)
P
....
GE
(iii)
(v)
1
6
IS
19
22
23
24
COMMIlTEE
ON PUBLIC UNDERTAKINGS
(1990-91)
Shri Basudcb Ac:haria
2.
Shri Manoranjan Bhakta
3.
Shri Narsingh Rao
Dilit
fl. Shri Bal Gopal Mishra
5.
Shri
R.
Mutbiah
C'(AIRMAN
MEMBERS
Lok
§abha
6.
Shri Harpal Singh
'anwar
7.
Dr. A.K. Patel
8.
Sbri V.
Srccnivua
Pruad
9.
Shri Kalpnath Rai
10.
Shri Rajdcv Singh
11.
Shri R. Surcndcr Reddy
12.
Shri Daulat Ram Saran
13.
Prof. Saif-ud-din Soz
14.
Shri Piyus Tiraky
15.
Shri Hukumdeo Narayan Yldav
Rajya
SGbIuz
16.
Shri Dipcn Ghosh
17.
Shri Ajit P.K. JoJi
18. Shri Pramod Mabajan
19.
Shri Sycd Sibtey Razi
20.
Dr. O. Vija)'8 Mohan Reddy
21.
Prof. Cbandrcsh P. Thakur
22.
·Shri Virendra Verma
SECRETARIAT
.
1.
Shri R.D. Sharma -
10;'"
Secreltlry
2.
Shri S.N.
Banerjee-
Deputy Secre'tlry
3.
Smt. P.K. Sandhu - Under Secretary
·Ce~d
10
be
II
member conlequenl on his resignlilion from Rajya SlIbha w.e.f.
14
JUIIC.
1910.
Ii,
I
INTRODUcnON
I.
the Chairman. Committee
on
Public Undertakings having been
authorised
by
the Committee to submit the
Report
on their behalf. present
this 2nd
Report
on
Action
Taken
by the Government on the recommenda-
tions contained in the 51st
Report
of
the Committee on Public Undertak-
ings (Eighth Lok Sabha) on
Air
India - Fare aspect.
..
2.
The 51st
Report
of
the Committee
on
Public Undertakings
wu
presented to Lok Sabha on 23rd February.
1989.
Replies
of
the Govern-
ment to all the recommendations contained
in
the Report were received
on
21
September. 1989.
The
Committee on Public Undertakings considered
and adopted this
Report
at their sitting held on
12
June.
1990.
3.
An analysis
of
the action taken
by
the Government on the recommenda-
tions contained
in
the
Slst
Report
(1988-89)
of
the Committce
is
given
in
Appendix-n.
NEW
DBUII:
23
July. 1990
Sravona
1.
1912 (Saka)
BASUDEB
ACHARIA
ChQirman.
Commil1~t
on
Public
Ulld~rtClkingl".
CItAP'I'EIl I
REPORT
Tho' Report
of
the Committee
pe~s
with the
8",1ion
taken
by
the
Government on the rccommendatioDS
~tain,.t\
in
the Fifty·fir5t Report
(Eiahth
Lok
Sabha)
of
the Committee..
~
",,61ti.Undertakinp
on
'Air
Indi....-Fare
upe;t.whieb
was
present~a
to
Lok Sabha on 23rd February,
1989.
2.
Action· taken replies have been received from the Government
in
respect
of
an the
15
recommendations contained
in
the RepOrt. These have
been cateeoriscd as follows:
i)
Rcco~mendationsiObservatioftl
that have been accepted
by
the Gov-
ernment:
SI.
NOI,
1,
2. 3,
5,
6,
12. 13.
14
and
1~.
ii)
Rec:ommendationslObscrvatiolll which the Committee do not desire to
PUrlUC
.
in
view
of
tile Government's replies:
SI
Nos.
4, 7 IDd.8.
Ui)
.
R'CCommendltionsiObse~atic)ns
in
respect of which replies
of
the
Govcrnmcmt- have not ()ccn
~pted
by
the Committee:
·51.
NGS.
9. 10 and·11
iv) JIlccommendauonSluoservatlOM
in
respeet
of
which final replies of the
OcJfl:rnment'ire
still awaited: .
-NIL
3.
Thc Committee
wilt
now deal with the action taken
by
tbe Government on
some of their rGCOmmendationl.
A.
R~duetion
in fare
'On
the direct service betwetn
Gulf
and Trivandrum
a..,...,.,.dalloal
51.
NOlo
I,
3
...
6 (Pa.......,...
I,
3 and 6, Part
II)
4.
11Ie
Committcc'lI examination of-fare aspect of Air India. revealed that
thoup
there had been rca.wnable Jl'ounds for establishina a lower fare on the
introcluctioa
0(
a direct
5Cl'Vice
on Gulf-Trivandrum sector. no serious attempt
had been made to restructure the fare on this lector. As
,a
result. thc farc on
this sector continued to be charled
by
combination of
two
sector fires i.e,
from
Gulf states to Bombay with add on
by
Indian Airlines for the leCtor Bombay-
Trivandrum. Considering the fact that
it
was
poor labourers who had been
deprived all these years of the relief that should have been provided on
introduction
of
direct service on this lector. the Committee stressed tbat tbere
is
need for
takin.
immediate steps to establish a
Jo.wer
fare on the direct service.
The Committee recommendcd that Government should takc up tbis mattcr
with
the concerned Governments at the appropriate Icvcl. expeditiously and effect
1
2
reduction
in
the fare
on
the direct services between Gulf countries and
Trivandrum.
S.
The Government have stated
in
thier reply that although efforts have
been made
in
the past in the forum
of
lATA
to reduce fares on Gulf-
TrivaneJrum sector. Air India have not succeeded primarily due to the fact
that the international carriers operating to and from India are concerned
about prorate losses as they
do
not operate to Trivandrum.
It
has been
stated that this matter has now been taken up at the appropriate level with
tbe concerned Governments.
NevertJleles,'i. at the
tilt
~evant
Passenger Tariff Coordination' Confer-
ence
in
~vembcr
~
1988
Air
India have
r~portedly
succeeded
in
specifvinll
fares· between Middle East and Trivandrum. as a result
of
which. since
July
1.
1989
on the introduction of
new
currency system, fares between the
Gulf and
Trivanl;t~'
win ndt
be'oOnstru~ea'over
Bombay but will
be
a
specified fare. Air India. after lellgthy negotiations with the Middle East
carri~J:s
have reportedly succeeded
in
specifying fares between the Middle
E8st and Trivandrum at the levels prevailing prior to July.
1989".
With'tbe'
introduction
of
the new currency system from July
1,
1989
th~
Trivandrum-,
Dubai
.onewa)'
'economy 'fare
wOuld
havet.:come'
IN'R
59itt:
But
'it~as
been kept as INR 4454. as a result
of
which a saving of Rs, 873 which
is
nearly
20%
has been effected.
6.
ThoUKb
It
has been Itated tbat tbe fares between the Gulr and
Trlvandr~m
have been
I~med
on,
the Introduction of
new
currency system
since July 1. 1989.
It
Is
not clear whetb!l' the tares
110
s~lned
aft.·lower
than. the f
.....
eoattructed over
Bombay
I.e.
by
cbmblnatlon
of
two\'sector'
fares from Gulr
'''ates
to 80mbay with add on
-by
Indian Airlines for the
,~ctor~
Bomt)ay-Trlvandrum. The Committee would like to
be
Inform~
er
tbe same. The Committee would also'
Uke
to
If.now
the outcome,
of
erroriS
made
by
the Ge¥erament In consultation with the Governments or con-
cerned
countiieilcanlea
to
brinK down the fare
on
the direct services
between
Gulf and TrlvaDdrum.
The Committee also note that
whDe
replyfna to a Starred
QUe5llon
No.
106
In
Lok Sabba on 17 March, 1990. the Minister of CI.lI. Aviation
a.reed .
Co
(.Onatltule-' ,departmental Cemmlttte to
.-.
Int~
the question of
ratlonallsln, the fare on the Trlvandrum Gulr sector. Tile Committee would
like to know wbether the proposed Committee ·bas since been constitute{
and. If so. tbe outcome
of
their exanilnatlon
ana
tbe action taken thereon.
B. U"dercllning
of
Fares
Recommendation
91.
No.
9 (Paraaraph 9. Part II)
7.
The Committee bad noted that undercutting of fares
,is
generally
prevalent
in
all
regions where Air India operates and that one of the
reasons
why
Air India was losing
was
because of indiscriminate undercut-
ting of fare!!., The Committee. therefore. reiterated their earlier
view
exprcs5Cd
in
their 40th Report (1987-88) that a workable solution could
bc
3
found to overcome the malady
of
undercutting
of
fares provided the matter
is
taken up appropriately
in
tbe various international forums including
International Civil Aviation Organisation
and
lATA
to muster their
support with a view to taking effective action.
8.
Government have stated
in
their reel)' that
both'
1CA.~
and
lATA
have been concerned about internatioaal
ait·
tariff malpractices. Whilst
lATA
had a compliance machinery within' the Organisation but somehow
it could not work satisfactorily and IATA'have done away with it.
ICAO's
work has mostly been indirect through the Fares and Rates Panel under
the Air Transport Division.
It
is
mostly in the shape
of
guidance
of
States.
It
has been further stated that realising the salutary effects
of
stabilising
the fares and improving yields. there have been Yield Improvement
Programme (YIP) at local levels
on
patallel sectors, and carriers
do
get
together to try and adhere to the filed fare levels as..far as possible. In so
faru
bldia
is
concerned, it has been stated that BAR(Board
of
Airline
Representatives) India under the Chairmanship
of
Air India has steered a
go-c:lean
compaignsnd
it
has yielded satisfactory results. As far as the Gulf
is
'concerned, the Gulf Cooperation Council States comprising
of
UAE,
Bahrain.
Qatar
and Oman along with Air India have reportedly established
a Yield Improvement Programme which
is
functioning satisfactorily and
the yield levels are fairly stable.
9. The Government's reply I. silent
a.
to whether any fresh Initiative
wu
taken by Govt. in Ibe International forum. to curb international air
trame
malpractices. NotwJthltandlnl the Yield Improvement Proarammes estab-
lished
In
India and some Slatel
In
Gulf undercuUlna
of
farel
wu
reported
to
be
.nerally
prevalent In all reaioal that Air ladla operates. Inddentally,
Govt. have
also
..
ated elsewhere In reply to a reeomm_datlon
In
ibis report
lbal lbe
loa
to Air
ladla
of
lnfIIc
meant for TrlYalldrum over olber points
like Colombo
Is
due to unethical practices
of
some camen. The Committee
would
Uke
tbe
Gon.
to take
etrectln
matlUreI
to
c:urt.
the
nil
of
uadercuttlnl
of
farel.prevaUlnl especially
In
the realons
"bere
our Dltlonal
CUTler.
operate
aad
apprise the Cemmlttee
of
action taken in tbll
reprd.
C ugisl4t;on to prohibit
und~rcutt;ng
of
approv~d
fares
and
~stablishment
of
a Tariff
Enforcem~nt
Directorat~,
Recom,nefidatloa Sl. No.
10
(Par
.....
pb 10,
Part
U)
10. The Committee in their 24th Report (1986.87) on Air India had
observed
tha(they'
are
ai
a loss
to
understapd' why-Oovernment
hive
not
so far considered the need for having a legislation to
prohi,bit,under~utting,
of approved fares and to ban appointment
of
non-airline parties
....
GSAI,
within the country.
The
Committee regretted
"to
point out thal
110
final
reply had been furnished
by
Government on t"is recommendation till then.
However. the Committee were mformed that Govt.
was
considering
establishment
of
a Tariff Enforcement, Dircttorate under DGCA
tet
enforce. already agreed tariffs and to
P~
..
vcPt undercutting of ·fares. The
4
Committee desired
to
be informed
as
to
when the proposed directorace
would
be
estabtfsheo
and
what m.odalities would
be
obseJ'Ycd
by
this
. Directorate to ensure actual implementation
of
established farea.
U.
Govt. have stated in their reply
that
following modalities will be
adopted for the efficient functioning
of
the
proposed directorate
of
Tariffs
and Enforcement:
(a) Spot investigations
by
surprise checks/visits
to
airline ticketing
officea, travel agents, airport check in desks, loading ramps, carlO
bandlina units
and
aUied operating positions
to
detect malpractices
in 1ariffs, traffic rights and noncompliance of terms and conditions
of
various permits issued
to
airlines
a~
other'
air transport
operators;
(b) Collection and examination
of
evidence during spot checks;
(c) Followup through administrative
ac=tion;
(d) Fol1owup tbrough Icgal proceedings if necessary for conviction in a
court
of
law.
U.
'Tbe CommlUel
caDDol
but
espreu
their dismay over tbe lrrelPOl'llve-
...
of
tbe Govt.
la
furalsblaa a reply to the recommendation made
by
tbe
Committee
II
Ionl
back
III
In
AprU
1987.
The Government have not cared
to rep.y
evea~w
..
to
wlay
they bave
Dot
10
far coDildered the
need
for
...
YI
...............
~o
pnlalblt undercuttlna
of
approved fares
.....
to ban
...-,olDtment
of
nOD-IlrDae
parties
a.
GSAs within our
COIlDlr).
The
Committee
require
<at
Govemmeut Ibould Intlmat.
tbe
acSJon
takea
on
this recommendation
wl&hiD
three months from tbe date
or
presentalloD
of
thb"port.
.
13. The
Gown
.....
t· •
.....,
II aIIo .lIent
OD
the 'Proposed
.........
IuDeDt
of the
DIredora&e
01
TarUts
aDd
Itntorcemeal
to
enrorce already
alJftd
tariffs
ad
to preyeDt Illlderc:uUlDl
or
fares. The Committee desire to. be
Informed
of
tIM
.....
dklsJoD
takeD
Ia tbls
"lard,
at the earliest.
D.
Product
vlIT;ation
as
a determinant factor
in
the fare level
ReeommeDdatJoa SI. No.
11
(Parav-ph
11,
Part
D)
14.
The Committce had been informed that the pricing
policy
of airlines
varies
according
(0
nature
of
the product. The
Managin,
Director
of
Air
India had deposed that a discount
in
fare
is
accepted
if
the product is •
inferior.
The
Committee were
it
• 'Ioa to understand
why
nature of the
product
sbouldio.,t·bctaien
into consideration at the time
of
determining
lares so that different fares
Irt
established .dQpend\n2 upon the
HUAlitv
of
product.
Tbe
Committee
boped
tbat
tIliI
would
eliminate
UDOfticiII
diIoouDt
beln, offered" for inferior procllb. and
~esl'~'
t"t
Air
Iildia
shouliJ take
up-
Ihas
matter
at
the
lATA
Traffic Conferences for establishin, fares
.akina inlo account product vlrialion.
s
IS. The Government have stated
in
their reply that the policics and
procedures followed under the
lATA
framework are such that
all
Member
airlines are considered equal and no consideration
is
given to the nature of
the product. This
is
so
as
it
is
considered to be very vital for the
functioning
of
lATA
as each airline has absolute vote within
lATA
Conference and a negative vote can hold up an entire agreement if it
is
not
in
the interest
of
an airline. Differential pricing within
lATA
is
considered
a taboo. Airlines at
all
times continue to strive to upgrade their product
in
terms of services. aircraft. routing etc. to suit market needs. Therefore,
it
has been stated that flexibility
in
price
is
best left to be determined
by
market forces rather
o..n
to be determined
by
lATA
forum.
16.
The Committee
an'
uable
to appreciate Government'. reply. The
Commltt
..
Iftl
tb.t
If
tbe Itope for undercuttlnc'oUare
Is
to
be completel,
eliminated, product varlatloa needs
to
be counted 8
••
factor
In
determlnlnl
fare levels. The Committee would, therefore,
urp
that Air india .bould
make an attempt
In
tbe lATA forum to carry conviction and
to
eel
the rare
construction Rules suUably-amended to make provision for
dlrrerent~l"'~
le\'els
on
aeount
of
produd
varlatioDl.
CHAPTER
D
RECOMMENDATIONS
THAT
HAVE
BEEN ACCEPTED BY THE.
GOVERNMENT
.............
SI.
No.
I (Panp1Ipb
No.
I)
The
Committee
find that the only route that has been consistently
earning profits., for
Aif
India during the past
n:tany
yea~
is
India-Gulf
roule.
Ten
out
of
thirteen routes
operated
by
Air
India during the
last
two
years have incurred operating losses. India-Gulf route made a profit
of
Rs.
64
crores in 1986-87
and
p.s. 43 crores in 1987-88 while the Corporation
as
a whole incurrf't:i a net loss
of
Rs. 43.41 crores in 1987-88. This justifiably
raises a question whether the fares charged
on
India-Gulf route are
reasonable particularly
in
view
of
the fact that most
of
the passengers
travelling on this route arc Indian labourers working
in
Gulf countries. The
Committee cannot but feel that Air India
is
overcharging
in
this sector to
make up their losses in
other
routes.
The
Committee's examination
of
fare
aspect
of
Air
India has revealed that though there have been reasonable
grounds for establishing a lower fare on the introduction
of
a direct service
on Gulf-Trivandrum sector, no serious
attempt
has been made
to
restruc-
ture the fare on this sector.
As
a result, the fare on this sector continues to
be charged
by
combination
of
two sector fares i.e. from Gulf States to
Bombay with add on by Indian Airlines for the sector Bombay-Trivan-
drum. Considering the fact that it was
poor
labourers who have been
deprived
all
these years
of
the relief that should have been provided on
introduction
of
direct service on this sector, thc Committee cannot but
express their regret
on
the indifferent attitude
on
the part
of
Air India!
Government
in
this regard.
The
Committee feel that there
is
need for
taking immediate steps to establish a lower fare on the direct service
in
the
light of the recommendations contained in this report.
Reply
of
the Government
The
profitability
of
flight operations
is
dependent on among others, the
level
of
revenue, volume
of
traffic and level of operating costs. The major
reason for the profitability
of
Air India's
Gulf
route
is
the low level of
operating costs on this route, as also a high volume
of
traffic prevalent
in
the market between India and the
Gulf
Region.
The
costs
of
operation on
the
India/Gulf
route are low because
of
factors like the fuel costs, which
·forms 17.8%
of
the operating costs on the
Gulf
route, as comparcd to
23.0% on the
IndialUSA
route
and
19.7% on the IndialEurope route.
The establishment costs
of
Air India
in
the Gulf Region arc also low
because sales and marketing activity
is
undertaken through Air India's
6
7
General Sales
AFnts.
which
is
Jcsa
expensive than if
Air
India were to
undertake this activity by appointing its own staff.
It
is
for these reasons
that the overall cost structure on
Air
India flialus to
the:
Gulf is at a lower
level when
compared
to the cost structure
on
tbe
other
routes.
It
needs to be re-emphasized that the fares between Trivandrum and the
Gulf Region
are
not
hi'"
as compared
to
fares prevalent
in
several
other
Regions
of
the
world.
The
following table where fares on various sectors
have been expressed
on
a
per
mile basil, will illustrate this situation:
Sector
. ,
DubailBaghdad
LondonIRome
Genevallstanbul
DubaiIDjibouti
Ba,hdad/Rome
KuwaitlFrankru,t
leddahIGcDcYa
DubaiICopenha,cn
DubaiIBombay
DubailTrivlindrum
Kuwait/TrivandrJm
Distance
in
Miles
867
898
1189
1~5
1829
2.99
2523
.3028
1199
1~
2362
ODe way
Rate
per
Mile
Economy Fare
(INR)
(INk)
.589
5.29
5995
6.67
9142
7.69
7590
6.09
9498
5.19
11425
4.57
11316
4.48
161~
5.34
6020
5.02
8043
4.38
8591
3.64
As can be seen from thc abovc table. fares betwcen Trivandrum and the
Gulf compare favourllbly with fares in
other
major areas
of
the world.
With
re,ard
to the revenue
arisin,
from collection
of
fares.
it
has
b~n
explained
in
the
put
that fares cannot be set unilaterally by Air India. as
fares
are
established after agreement amongst concerned carriers at
International Forums
of
lATA.
Several major carriers operating between
the Gulf Region
and
India have expressed their opposition to proposals
made
by
Air
India for reduction
of
fares between the Gulf and Trivan·
drum.
Nevertheless. at the last relevant Passenger Tariff Coordination Confer-
ence in November 1988. Air-India have succeeded in specifying fares
between Middle East and Trivandrum. as a result
of
which. since July
I,
1989
on the introduction
of
new
curraey
SYl'CIII. fares between the Gulf
8
an4
Trivandrum will
not
be
constructed
over
BOII\bay
but
will
be
a
specified
fare.
The
matter
has
also been taken up with concerned
Governments.
[Ministry
of Civil
Aviation"
'tourism
O.M,.No.AV.2601111183-A dated
20tb
September, 1989.]
Com
.....
11
of
1M
CtIiliDlttee
(Pteue
sec
paraaraph
No.6
of
Chapter
I
of
the
report.)
Recommend~
51.
No. 2
(Pa
.......
pb
No.2)
Although
Air
Indil
commenceo in 1978 direct services between points in
Gulf
and
Trivandrum with resultant reduction in distance flown and
operlting
cost,
Air
India
CORtinues
to charge the same fare which was
applicable to the circuitous route via Bombay.
For
instance, the reduction
in distance
on
the direct route
Abu
Dhabi-Trivandrum
is
stated to be 173
miles and the savings in costs is· reported
to
be
about Rs.
2SO
to Rs.
300
per paucDger in each direction.
The
fuel consumption
on
landing
and
taking off a flight is quite substantial.
The
savings to
Air
India by having
direct
flipts
to Trivandrum without landina
at
Bombay should, therefore,
be quite larae. In this connection, the Committee h.lve obserVed that when
~ir
India established direct services between India-Moscow, India-
Mauritius
and
Amritsar-Binninaham, the airline did establish fare applic-
able to travel
on
the direct services which
,ave
a substantial relief to the
pauengers.
The
Committee fail
to
understand why this principle has not
been folfowed in the case
of
Gulf-Trivandrum sector espcciaUy when the
passengers likely
to
be
benefited by such step are the
poor
Indian
labourers.
Rep.y
01
the Go
..
nmeat
With introduction
of
India-Moscow
and
India-Mauritius direet flights
there was a very substantial reduction in mileage
in
the routes thllt were
bein,
flown and these were
as
much
as
39%
and
48%
respectively. In so
far
15
Amritsar-Birmingham route is concerned, Amritsar
due
to its
location on the Delhi-Amritslr-Birmingham fliaht was an intermediate
point
344
km. from Delhi. It may
be
seen that there is hardly any parallel
between Delhi-Birmingham vis-a-vis Dubai-Trivandrum.
It
ma), be seen
that Dubai-Bombay is 1930
Km.,
Dubai-Trivandrum
is
2952
Km. thus
Trivandrum
is
farther away from Dubai by 1022 Km. In
the:
~
of
Amritsar the fate was reduced only for operations via Amritsar OIl •
particular flight. This had the concurrence
of
British Airways whidl was
the only
other
carrier. This
is
not true
in
the case of India-Gulf where
morc international carriers are involved who have been disinclined to
alree.
However, effective from July, 1989
Air
India after lenathy negotiation.
With
the Middle East carriers have sucx:ceded in spcdfying fares between
the Middle
Eut
and Trivandrum at tbe levels
prev,ilin,
prior
to
July,
9
1989.
Now onwards the Trivandrum
fue
from Middle
Eat
will not
be
constructed over Bombay
as
in
tbe
put.
but,
will
be a apccificd fare.
[Ministry
of'
Civil Aviation
&:
Tourism O.M. No. AV.
260111lA13-A
dated tbe 20th September, 1989.]
Recommendatloa
Serial
No.
3
(Para
....
pb
No.3)
One reason advanced for not establishing a lower fare on direct services
on Gulf-Trivandnun sector is the current
lATA
rule on the subject which
permits a deviation in mileage at the same fare level upto a maximum of
15%.
It
has been indicated that reduction
in
distance for a direct opcfation
Abu Dhabi-Trivandrum versus that
via
Bombay
is
only 9%
which
is
~ithin
the permissible deviation
lUnit.
The Committee arc not convinced
of
this
explanation. They noh; that in respect of direct operation on Birmingfl,m-
Amritsar sector, a
low~r
[ue
was established even when the perccn"ge
reduction
in
distance was only
11
% which
is
obviously
well
within the
IA
T A permissible deviation. The Committee would, therefore. urge the
Ministry of Civil Aviation to take immediate steps to revise the fare on
Gulf-Trivandrum
as
soon
as
possible.
Reply
01
the Government
Before the fare tolfrom Amritsar was established after introduction of
the Amritsar-Birmingham flight, passengers were
charg«<d
combination of
the sector fares over Delhi. Accardin. to the
lATA
fare construction
rules, Amritsar
was
found to be higher fare to Birmingham than ex-Delhi.
On
that particular flight therefore all passengers travelling from Delhi
would have had to pay a higher tare on the basis of the Amritsar-
Birmingham level. In order to avoid this situation, the Amritsar fare
was
specified at the level of DelhilBirmingham instead of establishing
it
by
combination
of
the sector fares over Delhi.
Now,
sinc:e
)uly lst
1989
Trivandrum fare has been specified and
is
not
constructed 'over' Bombay as
in
the past. Prior to July
lst,1989
the
Trivandrum-Dubai fare on INR
4454
has now been specifacd for Trivan-
drum. With the introduction of the new currency system 'from July lst,
1989.
the Trivandrum-Dubai oneway economy fare would
nve
become
INR
5920.
But
it
has been kept
as
tNR
5920.
Bqt it
hu
beell
iiept
as
INR
4454,
as
a result of which a saving
of
Rs~
873
which is nearly
2O~nas
been
effected.
[Ministry of Civil ",viation
&:
Tourism O.M. No. A
V.
260.111l183-A
dated the 20th September. 1989.]
10
Comments
of
the Committee
(Please
sec
paragraph No. 6
of
Chapter
I
of
the report).
Recommendation Serial
No.
5 (Para
....
ph
No.
S)
According
to
Ranadive Committee.
Air
India has a practice
of
common-
rating points even if they
are
not equidistant from the points with which
they are common-ratcd.
The
Committec
in
this connection note that the
fares between gateway points in India such as Bombay and Delhi on the
one hand
and
certain points
in
Europe
such
as
ParislFrankfurti Amsterdam
or
London
or
Ncw YorkIMontrcal are the same irrespectivc
of
the
distance.
The
fares from Bombay
and
Delhi to four points in the UAE.
namely, Abu
Dhabi, Dubai.
Ras-al-Khaima and Sharjah have also been
common-rated.
The
Committee. however. regret to find that the question
of
common-rating Bomb.ay
and
Trivandrum vis-a-vis the points in the Gulf
has not been examined by the Ministry so far inl!pite
of
the fact that this
has been recommended by thc Ranadive Committee as early
as
in
1984.
The Committee dcsire that the Government should immediately undertake
examination
of
this question and take steps to effect common-rating
Bombay and Trivandrum vis-a-vis the points in the Gulf. if such action
is
likely
fO
result in providing more relief to passengers. Incidentally. the
Committee would allo like to be apprised
of
the considerations which led
to common-rating
of
Abu
Dhabi. Dubai, Ras-al-Khaima and Sharjah vis-a-
vis
Bombay and Delhi.
Reply
of the Government
The
practice
of
common-rating some gateway point!! is a practice
followed by all international carriers throughout the world. Air-India also
follows it. The system is based on a number
of
factors which include
distance. availability
of
international operations to/from the points. acces-
sibility
by
road and rail. prorate absorption and the standard deviation
of
20%. etc.
In the casc
of
Europe.
due
to the proximity
of
different airports, the
multiplicity
of
airlines
and
the fact that the mileages are almost equidilltant
when taken gcographically.
it
is possil;!i to
comma.rate
large number
of
points.
On
thc basis
of
what has
been
stat cd earlier it was possible to
OOIIUDOD-fatc
Abu
Dhabi, Dubai,
Raa-a1-Kh-ima
b
,
Slwjah
as
the diltances
arc almost equal
~ilh
prorate absorptions are not involved and that both
Bombay-Delhi
are
~TViced
by
the Gulf carriers and
other
airlines. Further
consideration
bcina
that all these points are close to each othcr and can be
reached
by
surface transport which
i.
..
fairly ea.
..
y
in
the area. As
IAIA
have now specified the fare for Trivandrum which
is
higher than Bombay
fare. the common-rating
of
Bombay/DC\hi and Trivajldrum may
be
acceptable to all carriers only at the higher levcl which in this case
is
for
Trivandrum
in
vtew
of
the high prorate absorptions when travel between
11
Bombay/Delhi
or
Trivandruin
is
on Indian
Airlin~.
In almost all countries
tbere
is
a
,ateway
principle followed and
fai'el;~to
interior parts are
constructed over the
,aleway
airport.
It
may be
~eri
...
~.
an example that in
the case
of
USA for transportation to altd from India'
fa~s
are specified to
the gateway point
of
New York on the East Coast and farcs to other
interior points are constructed over
it. In the case
of
Europe also farcs to
interior German points are
constru'ted
Over
Frankfurt. to interior French
points over
Piris and to interior Italian points over Rome. This
is
a
general principle which
is
followed for fare construction with the exception
of limited
num~r
of
interior points which arc specified for certain fare
types. This
is
the case
of
India as well when fares to Bombay, Delhi.
Calcutta. Madras and now Trivandrum are specified.
[Ministry
of
Civil Aviation & Tourfsm
U.O.
No. AV. 26011/l183-A
. dated the 20th September. 1989.)
Recommendation Serial
No.
6 (Parall'aph
No.6)
As for lowering the fare level on Gulf-Trivandrum direct operations. the
Secretary
of
the Ministry
of
Civil Aviation informed the Committee during
evidence:
"On
the face
of
it. it appears to be quite reasonable
.......
We
would certainly like this to be
con~idered
favourably." He also assured the
Committee
that the matter
will
be
taken
up
at
the GOvernment level.
Considerin.
thaT
there has already been a long delay
in
rc-structuring the
fafe level. the Committee recommend that Government take
up
this
matter with the concerned Governments at the appropriate level expediti-
ously and effect reduction in the fllre on the direct services between Gulf
countries and Trivandrum.
Reply
of
tbe Government
Although efforts have been made
in
the past in the forum
of
I
AT
A to
reduce fares on Gulf-Trivandrum sector Air India have not succeeded
primarily due to the .fact that the international cllrriers
operatin,
to
anc
from India are concerned about prorate losses as they do not. operate to'
Trivandrum.
This matter has now been taken up at the appropriate level with the
concerned Governments.
However. now Trivandrum fares have been specified since July
lst'
....
after the introduction
of
new currency system.
[Ministry
of
Civil Aviation
&:
Tourism O.M. No. AV.
2601111183-A
dated the 20th September. 1989.)
12
Recommendadon Serial
No.
11
(Panp'aph
No.
Il)
The Committee have already dealt with in their 24th
Rcpon
(1986-87) tbe
question of malpractices resulting on aceount of undercutting of fares. The
Committee would like
to
empha.llise that the procedure laid down
by
Air
India for determination
of
the rate of discount.
if
at
all
to
be
given. should be
strictly followed at all levels
in
order to avoid malpractices. The Committee
would
sugest
in this connection that Vigilance Depanment of Air India
should undertake frequent surprise checks and use innovative methods for
detecting cases of malpractices and irregularities without waiting for
Accounts Department to report such cases on the basis of accounts.
Reply
of
tbe Government
Air India have noted the suggestion made
by
the Committee. The
Vigilance Department
of
Air India has
bee.n
reorganised and this Department
has speeded up its activities to curb malpractices of the type for which concern
has been expressed
by
the Committee.
To monitor the effective disbursement of incentives. Air India carries out
checks at various levels starting with accounting checks at Station level,
ehecb
at the regional level
by
the Regional Head and the Rcgional Accounts
manager and at the Headquarters level where a monitoring cell has been
established which periodically examines the incentive disbursements and
procedures of various stations on the Air India network. Profit Committees
)lave been introduced which are constituted
Itt
the Regional Heads' level to
further administer and streamline incentives and their implementation.
[Ministry of Civil Aviation
& Tourism O.M. No. A.V. 26011/1/83-A
dated the 20th September. 1989.]
,Recommendation Serial
No.
13
(Pangraph
No.
13)
According to Air India. with the advent of deregulation and abolition of
lATA compliance machinery
it
docs not face any disadvantage
in
the market$
world wide on account of beina a member of
lATA
and
is
on the same
competitive terms
as
non-lATA carriers. The estimated cost of Air India's
membership
in
lATA
for
1988
is
stated to be
Rs.
60.76 lakhs. The value of
services received from lATA directly, however, are reported to
be
only about
Rs.
39.35 lakhs. It has been stated that the benefits received which cannot be
directly quantified, run into crores of rupees. The Committee feel that Air
India should make effective use of all services provided
by
lATA
with
a
view
to maximisiftg its benefits to
be
derived from lATA. Since Air India's reply
with
reaard to benefits derived from its remaining a member of lATA
is
not
specific and the review
of
the advantages that accrue to Air India
by
remainin, • member of
lATA
was undertaken long time back. the
Committee desire that a fresh review· of cost benefit analysis of its being a
member
of
lATA should immediately
be
undertaken and Committee
apprised of the result of review.
13
Reply
of
tbe GOftrDmeDt
Air India
do
make effective usc
of
all services provided by
lATA
and
arc deriving maximum benefits by beina a
member
of
lATA.
As desired
by
the Committee
Air
India have taken a fresh review of
the
cost-benefit
analysis
of
being a
member
of
lATA.
Air
India
is
of
the
opinion
that
the
benefits are
not
directly quantifiable
but.
have however
e.~timated
benefits
derived from facilities provided by
lATA.
e.g..
facilities
of
Clearing
House. Multilateral Interline Traffic
A,recments.
Bank
Scttlement Plans.
Technical Service.'i Package etc. which
arc
estimated
to
be nearly Rs. 45
lakhs. Air India also derives some indirect benefits by participating in
Tariff Coordination machinery both in the passenger
and
cargo side.
It
has
also been pos.'iible
to
discullS
fares with
US
carriers which otherwise would
not have been possible
due
to
the
US
anti-trust laws. As a result
of
this it
has been .possible to stabilise fares in such markets.
It
is
the
considered opinion
of
the
Air
India that the benefits
to
them
both from direct
and
indirect aains are far more than the recurrina
expenditure they incur for
bein,
a
member
of
lATA.
As such they
consider continuing
the
Membership
of
lATA
to
be
of
bcnClfit
10 them.
[Ministry
of
Civil Aviation
IL
Tourism
O.M.
No.
A.V.
26011/1183-A
dated
the 20th September.
1989.]
Reeommendatlon SerIal No.
14
(Parqrapb
No. 14)
The
Committee
on
Public Undertakings
in
their 14th Report (1986-87)
had observed that
13
out
of
16 routes
of
passenger services operated
by
Air India had incurred operating
los.~s
durina
19796-84.
The
Committee
regret
to
find
that
Air
India's route-wise performance
hall
lIince
not
improved.
Out
of
the
13
passenger routes
operated
by
Air
India
in
1987-88
only three routes have
earned
profit
and
all
ttae
rest have incurred
operating
Ios.~s.
Air
India has incurred
an
overillioss
of
RI.
43.41 crores
in
1987-88 and Rs. 6.30 crares durina
April-July.
1988"
in
spite
of
the
cushion provided
by
substantial unearned incbmc acquired from royalty
compensation from
other
airlines.
Th~
net amount
of
compensation
received
by
Air India
durina
1987-88 was
to
the tune
of
Rs. 8.89 crures.
The Committee note
that
in an endeavour to improve the Corporation's
overall profitability.
Air
India has withdrawn its operations
to
Dar-es·
Salaam.
Harare.
Laaos and
Dhaka.
and is
takin,
various measures
by
providing vastly improved product with the introduction
of
non-stop
operations and by intensifying its marketina activities. The Committee
desire that no effort should be spared
to
tmprove the performance
of
Air
India
in
all its routes
in
a time bound framework.
Reply
f1l
the
GO\'fl'BJDeIIt
With a view
to
improvina the routewisc and overall performance. Air
India have
In
the recent past reviewed various aspects
of
their operatiolU
and carried out certain route modifications.
chan,es
in
pattern
of
opera-
14
tions, additions to the points
of
operations, improvements
in
inflight
servicclI and Intensified advertising and sales promotion. This has enabled
Ait
India
to
better its product as they now not only operate faster nonstop
point to point services with improved departure and arrival timings to
Europe,
UK
and Japan but more often also. Such efforts to better its
product arc to yield
imprOVed
financial and physical performances.
[Ministry
of
Civil Aviation
&.
Tourism O.M. No. A.V. 26011/1183-A
dated the 20th September,
1989.J
Reeommeadatloa Serial
No..
15
(Parqrapb
No.
15)
The Committee on Public Undertakings
in
their 14th Report (1986-87)
had obAerved that Air India's share
of
world-wide industry's scheduled
international
tl'flffic
has come down from 2.03%
in
1980 to 1.92%
in
1984.
The
Committee are distressed to find that Air India's achievements
in
this
regard has further deteriorated
in
the succeeding years. Air India's share
of international trafflc
wu
just 1.64%
in
1985,
1.63%
in
1986
and 1.68%
in
1987.
Accordinl to the Ministry of Civil Aviation and Tourism Air India's
increase
In
capacity ,did not keep pace with the Industry's' increase
in
capacity. Whereas from
1980
to
1987
the industry increased its capacity
in
terms of
AtKM
(Avaitable Tonne kilometers)
by
41%, Air Inida's
increase
in
ATKM wal only 33%. The Committee hope that Air India
will
take
all
possible steps to achieve its objcctive
of
maintaining and improving
its rilhtful place
in
the international air transport industry.
Reply
or
the Govemmeal
Air India have been
COAveyed
the concern of the Committee. Air India
have already taken certain steps some of which have borne fruitful results
and
lOme
are expected to do so. However, the Committee
may
like
to
view
the performance
of
Air India considerin, that the Planning Commis-
sion cnvila,ed a
low
growth rate ior Air India during the Seventh Plan
period due to foreisn exchan,e resource crunch.
[Ministry of Civil Aviation
&.
Tourism O.M. No. A.V.
2601111183-A
dated the 20th September,
1989.)
CHAPTER
III
RECOMMENDATIONS
WHICH
THE
COMMITTEE
DO
NOT
DESIRE
TO
PURSUE
IN
VIEW
OF
THE
GOVERNMENT'S
REPLIES
Rec:ommend.tlon Serial No. 4
(Pan
....
ph
No.4)
An
analysis
of
capacity offered by
Air
India during the last eight years
reveals that the ratc
of
increase in capacity
on
Gulf
sector
has been well
below
10% since 1982 as against 32% increase in 1981.
The
capacity in
1985
and
1986
in fact declined sharply by
S.6%
and
3.9% respectively and
the
posi~ion
improved only in 1987 by
10.6%.
The
profit
earned
'by
the
Corporation
on
this
routc
has also steadily
been
declining
to
touch
the
level
of
Rs.43 crores in 1987-88 as against
the
profit
of
Rs.99
erores
earned
in
1984-85.
Though
the
dccline
in
profit in 1987-88
is
attributed
to
drop
in
yield on account
of
competition
and
resultant undercutting
of
fnres. the
Committee feel
that
irrational
fare
level on
the
direct service
on
Gulf-
Trivandrum sector
is
also
an
inlportant factor rcspomiible for the present
state
of
affairs. It is a known
fa~t
that
a large
number
of
Gulf
rasllengel'5
bound for
Trivandrum
instead
of
taking
Air
India's direct flight to
Trivandrum travel by
other
airlines taking circuitous route via
Colombo
which
is
cheaper.
Air
India
is
thus losing considerable traffic on account
of
high fare level in
the
Gulf-Trivandrum sector. This again underlines the
need for restructuring fare level
on
Gulf-Trivandrum sector.
Reply
of tbe Government
It
is
felt that the
10115
to
Air-India
of
traffic
meant
for Trivandrum
over
other
points like
Colombo
is
due
to
the
unethical practices
of
lIome 5th and
6th freedom carriers and is not related to hiah fare level
on
the Gulf-
Trivandrum
lICCtor.
It may
be
mentioned
that
all carriers apply same
lATA
fnres on the
route i.e.
the
National
Carricrs
of
UAE
viz.
Emirates
allo,
beside!!
others,
uses
the
same
fares.
[Mini!!try
of
Civil Aviation
Ie.
Tourism
O.M.
No.
A.V.
2601111183·A
dated
the
20th
September.
1989.]
Rec:ommendatlon Serial
No.
1
(Pan
....
ph
Net.
1)
The
Committee
find
that
there
has been wide directional imbalances
between fares from and
to
India when expressed in terms
of
local currency
viz.
Rupee,
although the
lATA
established farcs as arc applicable in both
directiQns
are
exactly
the
same in what is termed as basic currency
of
US
dollar
or
UK
pounds. The directional imbalances. according
to
the working
Paper
prepal):d by Ranadive
Committee,
arise due
to
fluctuationll
in
the
exchanae
rates
and
the
currency conversion factol'5 not being able to
keep
15
16
pace with frequent fluctuations
in
the values
of
the currencies. The
currency conversion factor
is
supposed to take care
of
the variations
in
the
exchange rate.
The
Committee observe that currency conversion factor,
however, may not
be ,established at all for travel to a country
or
it
may
be
established at different levels for travel
to
different countries.
For
instance,
there
is
reportedly
no
currency conversion factor in
respcctof
Abu Dhabi
Dirham for travel from the
UAE
to India. The Committee are not clear as
to what exactly arc the reasons for non-establishment
of
currency conver-
sion factor by
lATA
in this and
other
cases.
The
Committee would like to
be
apprised
of
the same.
Reply
of
the Government
It
is
presumed that the reference to currency conversion factor
is
in
fact
refercnce to the currency adjustment factor which
was
applicable from
various countries
till
30th
June,
1989. The directional imbalances refcrred
to arc quite complex in nature and are as a direct cause
of
number of
factors including the economy
of
the country, the per capita income, the
purchasing power
of
the people and in fact
in
the
ba.'1ic
terms the total
strength
of
the economy.
The
system
of
having the currency adjustment
factors was formulated to take care
of
t)\c variation in the currency in
relation to the
SDR
such that the strength and weakness of the currency as
related to the International Monitory System was taken care of.
In the system
of
things then, it was a prerogative
of
the national carrier
Dnd
the concerned Government to decide whether
or
not their currency
requircd any adjustment factor on it. In the case
of
UA!::, the currencies
being strong, the national
carriers/
Government decided,
in
fact to have
reduction factor on it. thus from
th~
UAE
to India the currency
adjustment factor
wu
estabiished at 0.9615 which
is
a 3.8% rcduction
related to the curreQcy.
In fact. over the period
of
years. since the currency system that
was
followed
by
lATA
could not keep pace with the rapidly changing
fluctuations. the
lATA
airlines have decided to do away with the system of
adjustment factors and have introduced a new system
frOIT.
..Iy 1st. 1989.
New cufrcncy system has been introduced from July
lst.
1989
and
is
being
followcd
by
thc
lATA
airlines in which the passenger fares. add-ons,
excess baggage rates. and related charges are specificd
in
the local
currency from the country of commencement
of
travel.
To
facilitate fare
conlltruction wherever various currencies are involved. the local currency
is
being converted into the Neutral Unit 0/ Cu"ency (NUC) at the prevailing
ratt
0/
txchange (ROE).
ROE
is
related to the US dollar value attached to
each currency and
is
established using the
lATA
clearing house rates. To
keep
thc.'1e
rates
of
exchange as close to reality as possible, the ROEs are
being monitored closely and would be revised four times a 'year (1st
October. 1st January. 1st April and
lit
July)
by
lATA.
Thus as the ROEs
vary the NUC derivative
will
also vary at a minimum
of
four times a year.
17
The system however.
does
not
envisage
that
the
local
selling
rates will
neccs..'1arily
change as once again,
the
-oorrectivc action
to
reduce imbalance
in
fares. has been basically put in
the
hands
of
the
concerned national
carriers and
the
Governments.
[Ministry
of
Civil Aviation & Tourism O.M.
No.
AV.2tiOllI1183·A
dlted
the 20th
September,
1989).
Recommendation Serial No. 8
(Pananph
No.8)
The currency conver.;ion factor applicable
to
Indian rupee for travel
from India
to
certain countries
is
stafed
to
be 1.25. This currency
conversion factor has, however, not been revised since it was e!!tablished
in
1979. Though. according
to
the
Ministry
of
Civil Aviation. it would have
been more appropriate
to
take increases
iR
currency factor
on
a regular
basis. regret ably this was not
done
in
the
past.
It
appears
that
only after
the matter was taken
up
by
the
Committee.
action was initiated to revise
the currcncy factor effective
September
1.
1988. Though. as a result. the
directional
imbalanccbetween
fares
to
and from India has been reduced,
the imbalance nevertheless remains
to
a considerable extent.
The
Commit·
tee have also been informed
that
frequent increase in the currency factor
would result
in
greater
Cost
to
the
Indian traveller.
The
Secretary. Ministry
of
Tourism
and
Civil Aviation nlso informed the Committee. "although
this currency revision has been
done.
I am not sure whether this
is
really
to
our
advantage." From the above versions. the Committee find that the
Government's thinking is not vcry clear on this issue. They therefore.
desire that the question
of
directional fare differences should be critically
gone into
in
depth by
Government
with a view
to
taking appropriate
action.
The
Committee would like to be informed
of
the action taken
in
this regard.
Reply of the Government
The
currency adju!!tment factor applicable
to
the Indian rupee
to
nearly
all
the areas remained ,unchanged over a long period
of
time. Since
January. 1989
Air
India's proposal for increase!! in the currency adjustment
factors were received
and
the
currency adjustment fact
on
were increased
to the extent markets could absorb. Full increases were not considered
desirable and as such
not
planned. as disproportionately high fares with no
relationship
to
the
purchasing power
of
the
market
would have destroyed
the industry in India. Abnormally high fares
in
local currency would have
led
to
increase in malpractices and would have been to the detriment
of
the airline and the tourism industry. It has
not
been
considcree,4
desirable
to equate Indian rupee farcs
to
equivalent
of
hard
currcncy fares in the .
reverse
di~cction
for such reasons. The strength
of
weakness
of
a
currency.
is
not controlled by the aviation industry but has its effect on it. In view
of
the foregoing It has
not
been considered desirable
to
proceed with
fa
indepth critical study
of
the question
of
directional imbalances
in
fare. _
the implication
of
restructuring directional fare differences.
18
A new currency sYitem efkctivc from July
lit.
1989
has been introduced
by
lATA
in which the farcs are spccificd in the local currencies. From this
datc
I system of having currency adjustment factors has been done away
with.
The imbalances
in
the Indian 1 upee fare vis-a-vis foreign currency has
beeR appreciably. rcdtaccd to the extent
marke~
CDuld
ablOrb.
(Niniltry
of Civil Aviation
&:
Tourism O.M. No. AV. 26011/1/83-A
dated September 20th. 1989.]
CHAPTER IV
RECOMMENDATIONS
IN
RESPECT OF WHICH REPLIES OF TIlE
GOVERNMENT HAVE NOT BEEN ACCEPTED
BY
mE
COMMtrrEE
Recommendation. Serial No. 9
(Paraaraph
No.9)
Air India being a member
of
International
Air
Transport
Auociation
(lATA)
applies
all
fares as decided
in
that body and which have been
approved by the Government
of
India. Within the
lATA
framework. the
establishment
of
farcs is derived through the machinery
of
multilateral
negotiations. The task involves reconciliation
of
a multitude
of
factors
lIuch
as
nation&1
policies. economic parameters. tourist revenues. social require·
ments. technical developments. competitive clements and the individual
philosophies
of
a large number
of
airlines who are involved
in
the task. The
Committee regret to note that having so established fares. they are not IItrietly
adhered to
in
practic!e
.nJndercutting
\)f fares
is
generally prevalent
in
all
regions where Air India operates. As admitted by the Managing Director. Air
India. one
of
the rearons why
Air
India is losing
is
because
of
indiscriminate
undercutting
of
fares. The Committee as already recommended
in
their 40th
Report (1987·88) are
of
the view that a workable solution could be found to
overcome the malady
of
undercutting
of
fares provided the matter
is
taken up
appropriately
in
the various International forums including International
Civil
A
viatioa
OrpDisatioa
and
lATA
to IIUJIter
Ibeir
Iupport
wiIb
a
view
to
taking eftectlve achon.
Reply
or
the Govemmeat
Both
ICAO
and
lATA
have been concerned about international air tariff
malpractices. Whilst IA T A had a compliance machinery within the
Organi.'I8tion. but somehow
it
could not work satisfactorily and
lATA
have
done away with
ICAO's
work has mostly been indirect through the Fares and
Rates Panel under the Air Transport Division.
It
is
mostly
in
the shape of
guidance
of
States.
Airlines. realising the salutary effects
of
atabilising the fares and improving
yields. there have been Yield Improvement Programme!! (YIP) at local levels
on parallel sectors.
and
carriers do get together to try and adhere to the filed
fare levels as far as possible. In so far as India is concerned.
BAR
India under
the Chairmanship
of
Air India ha., steered a gO-clean campai,n and
il
bas
yieldcd satisfac:tory rcsults.
As far as the Gulf
is
concerned. the Gulf
Cooperation Council States comprisin,
of
UAE.
Bahrain.
Qatar
and Oman
along with Air India have established a Yield Improvement Pro,rammc
which
is
functioning satisfactorily and the yield levels arc fairly stable.
19
20
[Ministry
of
Civil Aviation & Tourism
O.M.
No.
AV.
2601111183-A
dated
September
20th 1989.]
Comments or· the Committee
(Please see
paragraph
No. 9
of
Chapter
I
of
the
report).
RecommendaUon Serial No.
10
(Para&raph No.
10)
The
Committee
in
their 24th
Report
(1986-87)
on
Air India had
observcd
that
thcy
are
at a loss to undcl1>tand why
Government
have not
so far considered
the
need
for hllving d legislation to prohibit undercutting
of approved
fires
and
10
ban IIppointment
of
non-airline parties as GSAs
within
our
country.
The
Committee regret
to
point out that no final reply
has been furnished by
Government
on
this rec!Jmmendation so far.
However, the Committee have now
been
informed that they are consider-
ing establishment
of
a Tariff Enforcement Directorate undcr
DGCA
to
enforce alr.eady agrced tariffs
and
to
prevent undercutting
of
fares. The
Comtphtee would like to
be
informed as to when the proposed directorate
wo'f,1d
be
established and what modalities would be observed
by
this
Directorate
to
ensure actual implementaton
of
established fares.
Reply
or
the Government
The
Government
proposes
to
establish a Directorate of Tariffs and
Enforcement under the
DGCA.
Following modalities will be &depted
for
its efficient
(unctioning:-
(a) spot investigations. by surprise checks/visits to airlines ticketing
offices. travel agents. airport checks
in
desks. loading ramps, cargo
handling units and allied operating positions to detect malpractices
in
tariffs. traffic rights and noncompliance
of
terms
and
conditions
of
various permits issued to airlines and
other
air transport
operators;.
(b) Collection and examination
of
evidence during spot checks;
(c) Followup. through administrative action;
(d) Followup through legal proceedings if necessary for conviction in a
court
of
law.
[Ministry
of
Civil Aviation & Tourism
O.M.
No.
AV.
26011/1I83-A
dated
September
20th, 1989.)
CommenlS
of
the Committee
(Please see paragraph Nos.
12
and
13
of
Chapter 1
of
the report).
RecommendatioD Serial No.
11
(Panp'aph
No. 11)
The
Committee have
been
informed that the pricing policy
of
airlines
varies according
.to
nature
of
the
product According to the Managing
Director
of
Air
India.
discount
in
fare
is
accepted if
the
product
is
inferior. Thc Committee
are
at
B loss
to
understand why nature
of
the
product should not
be
taken into consideration at the time
of
determining
21
fares so that different fares arc established depending upon the quality
of
product. The Committee hope that this
will
eliminate unofficial discount
being offered for inferior product. The Committee desire that Air India
should take up this matter at the IA T A Traffic Conferences for establish-
ing
fares taking into account product variation.
Reply of tbe Government
The policies and procedures followed under the IA T A framework are
such that all Member airlines are considered equal and no consideration
is
givcn
to
the naturc of the product. This
is
so
as
it
is considered
to
be very
vital for the functioning of
lATA
as
each airline has absolute vote within
the IA T A Conference and a negative vote can hold up an entire
agreement if
it
is
not
in
the interest of an airline. Differential·
priciQ&
within lATA
is
considered a taboo. Airlines at all times continue to strive
to upgrade their product
in
terms of services, aircraft.
routin,
etc. to luit
market needs. Therefore, flexibility
in
price
is
best left to be detetmined
by
market forces rather than to be determined
by
lATA
forum.
[Ministry of Civil Aviation
& Tourism O.M. No. AV.
2601111183-,A
dated September lOth. 1989.]
Comments of the Committee
(Please
see
paragraph No.
16
of
Chapter I of the report)
CHAPTER
V
RECOMMEND A
nONS
IN RESPECT OF WHICH FINAL REPLIES
OF
THE
GOVERNMENT ARE STILL A WAITED
NEwDELI-II~
23
July.
1990
Sravana
1,
1912
(Saka)
BASUDEB ACHARIA.
Chairman,
Comm;ttu
on Public Undertakings.
APPENDIX
I
Millutu 0/ the Jrd .lilting 0/ tlte Committee on Public Undertakings held on
12th
JUlIe.
1990
The
Committee
sat
from
11.00 hn.
to
12.30 hn.
PRESENT
Shri Basudcb Acharia -
CIYirm.n
2.
Shri Manoranjan
Bhakta
3. Shri N'arsingh
Rao
Dixit
4.
Shri Bal Gopal Milhra
S.
Shri R. Muthiah
6.
Shri Harpal Singh Panwar
1.
Dr. A.K. Patel
8.
Shri Kalpnath Rai
9.
Shri Rajdev Singh
10.
Shri R. Surender Reddy
11.
Shri Daulat Ram Saran
12.
Prof. Snif-ud-din Soz
13.
Shri Piyus Tiraky
MDtBKItS
14.
Shri
Hukumdco
Narayan Yadav
15.
Shri Dipen Gh05h
16. Shri Ajit P.K. Jogi
17. Shri Pramod Mahajan
18. Shri Syed Sibcty Razi
19. Prof. Chandrelh P.
Thakur
SI!CRETARIAT
1.
Shri
R.D.
Sharma - Joint
Sec~'t1ry
2.
Shri S.N. Banerjee - Deputy Secretary I
3.
Shri N.M. Jatn - Under
StC~ltuy,
•
•
•
•
•
•
•
•
•
•
2.
The Committee, tbereafW.
OUDlidered
_
adopted
die
AcdoD
T
.....
Report on
Stwt
Report
ot
Committee on Publie
UndertakiAp
(1988-89)
oa
Air
India-Fare
upect.
The
Committee also authorised the Chairman to
finalise the Report
on
the basis
of
factual verification by the Ministry
of
Civil Aviation and
Air
India and to present the
lame
to Parliament.
•
•
•
•
•
• • • •
•
The Committee !'hcn adJOUrned.
23
APPENDIX
II
(Vkk
Para 3 of the Introduction)
Analysis
of
the Action
talcen
by the Government on the recommendations
contained
in
the 51st Report
of
the Commillee
on
Public Undertakings
(Eighth
Lok
Sabha)
on
Air India -
Fare
aspect.
I. Total number
of
recommendation
15
II. Recommendations that have been accepted
by
the 9
Government (Vide recommendations at
SI.
Nos.
1,2.3,5.6,12,13,14 and
IS)
Percentage to total
60%
III. Recommendations which the Committee do not 3
desire to pursue
in
view
of the Government's replies
(Vide recommendations at
SI.
Nos. 4, 7 and 8)
Percentage to total
20%
IV.
Recommendations
in
respect of which replies of the 3
Government have not been accepted
by
the Commit-
tee (Vide recommendations at
SI.
Nos. 9,
10
and
11)
Percentale to total
20%
V.
Rccommen~ations
in
respect of
which
final replies of
the Government are still awaited:
NIL
Percentage to total
