Boeing 737 MAX fiasco: DGCA to monitor predatory pricing of spot tickets

A fleet of 737 MAX. Indian aviation authorities will monitor spot fares to prevent predatory pricing following flight cancellations caused by the grounding of MAX planes.Boeing

The civil aviation authorities will keep a close watch on airfares in the next few weeks to prevent predatory pricing in the wake of the grounding of Boeing 737 MAX family aircraft on the fleet of airlines in the country resulting in flight cancellations, media reports say. Civil aviation regulator Directorate General of Civil Aviation (DGCA) is aware of the skyrocketing spot ticket prices and would interfere to keep them under check, Pradeep Singh Kharola, the civil aviation secretary, has told media persons. Meanwhile, SpiceJet, the worst-hit airline in the country because of the groundings, plans to approach Boeing the company for compensation for the disruption.

All MAX family aircraft on fleets of airlines in India have been grounded on global cues following the crash of a similar plane of the Ethiopian Airlines on March 9, the second such accident involving a similar plane in five months after the crash of an Indonesian Lion Air flight on October 28, 2018.

SpiceJet, the budget airline operating the most number of MAX aircraft in India, had to cancel 14 flights on Wednesday, following the DGCA directive on grounding the aircraft, taking a cue from global aviation authorities. SpiceJet with about 13 per cent domestic market share operates about 350 flights daily and has 13 B737 MAX 8 planes on its fleet of 78 aircraft serving about 50 destinations including seven overseas ones. The cancellation of SpiceJet flights has thrown the civil aviation scene in Indian into total disarray as it has been under strain from runaway cancellations by the ailing Jet Airways, which has been going through a financial crisis. Jet reportedly has been cancelling more than 200 flights daily with its fleet size of about 119 aircraft shrunken to nearly half following the grounding of leased aircraft following payment defaults. All five MAX family aircraft that Jet has on its fleet have already been in hangars following payment defaults to lessors. The airline was forced to ground five more planes on Wednesday, as it informed the stock exchange, following unpaid lessor's intervention.

"This is a significant reduction in domestic airline capacity. The additional capacity coming in is not likely to cover for this in the short term. Demand is going to be robust in the next few months due to holidays. The airfares are already 15 per cent higher than last season and due to this shortage, it will go higher," Sharat Dhall, COO of Yatra.com, told the Business Standard.

IndiGo, Air Vistara, Air Asia India and GoAir have no MAX aircraft on their fleet and have been enjoying the favourable price realisation. Spot airfares for Wednesday and Thursday saw a steep rise on important routes. Yatra.com data showed ticket prices on Mumbai-Chennai routes increased to Rs 20,329 for March 14, according to the report. This is against the spot fare of Rs 5,671 as of March 14 last year. The Mumbai-Delhi spot ticket of March 14 is Rs 13,495, which is 137 per cent higher than that on March 14 last year.

Though airlines have agreed to check on predatory pricing following simultaneous cancellation of flights, Kharola said the authorities will closely watch the fares.

A SpiceJet statement, meanwhile, promised the use of other types of aircraft on routes served by the MAX planes to minimize cancellations. "SpiceJet is optimising the use of its Boeing 737 NG and Bombardier Q400 aircraft to address the current situation. We are evaluating options for augmenting capacity through a mix of additional flights and aircraft inductions. We are sure our operations will be normal soon," the statement said.

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A Jet Airways passenger plane prepares to land as a new air traffic control tower under construction is seen in the background at the Indira Gandhi International Airport in New Delhi May 24, 2013.Reuters file

"Complying with the DGCA directive, SpiceJet has grounded its entire B737 Max fleet. A majority of passengers have been accommodated by SpiceJet on alternate flights. The airline is also offering the option of a full refund, changing the flight/date of travel, or change of destination (to the nearest alternate airport); all this without any cancellation charges or any fare difference," it said.

SpiceJet, which has 13 MAX aircraft, have 192 on order as the airline has been pursuing an aggressive growth strategy. Aviation circles believe the fuel-efficient, longer range B737 MAX planes helped suited the airline's growth strategy. However, with the future of the airliner still cloudy, SpiceJet is now looking at alternatives. "We will seek compensation from Boeing for the grounding of the planes. We will also seek recompensation for revenue loss and any kind of maintenance or technical overhaul that the aircraft will have to undergo. This is part of the contract, which we signed with Boeing for all the 737 MAX aircraft," a senior SpiceJet executive told Business Standard.

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