Airblue, Shaheen air fare hike not as excessive as alleged, analysis shows

An inquiry committee was constituted to determine whether the private operators exploited consumers during PIA crisis

ISLAMABAD: The Competition Commission of Pakistan (CCP) has completed its inquiry into the alleged exorbitant increase in airfares by Airblue and Shaheen Air.

According to a statement released on Monday, the commission had taken notice of concerns expressed over the conduct of the two private carriers during the suspension of Pakistan International Airlines’ (PIA) flight operations from October 1-7 2015 and February 2-9, 2016. It was alleged that fares had been increased by up to 300%.



A five-member inquiry committee was constituted to determine whether the private operators had exploited the consumers by charging high airfares.

Airblue and Shaheen Air were asked to submit detailed information about airfares charged from each passenger on domestic routes for the period under investigation as well as of preceding months. The commission also issued a press release asking consumers to provide evidence of tickets purchased at high rates.

It was observed that as per standard industry practice worldwide Airblue and Shaheen Air employ a revenue management system allowing them to set different parameters for determining the basic fare, some of which are demand and supply, size of the aircraft, the route, time of ticket booking, passenger load on other airlines, etc.

The lowest fares are applied when the booking is made well in advance, but as the time of the flight approaches near the higher fare classes are adopted depending on the availability of seats.

Investigation

The inquiry committee analysed airfares on the major domestic routes of Karachi-Islamabad, Islamabad-Karachi, Karachi-Lahore and Lahore-Karachi.

The results show that for Airblue on average the change in fares compared with the preceding month ranged from Rs159 to a maximum of Rs2,766.

The maximum increase can be attributed to the operation of two special flights between Karachi and Islamabad from February 2 to 4. Fares on the flights were higher due to the special arrangements made (aircraft, crew, fuel, etc) and the last minute bookings to facilitate PIA customers.

For Shaheen, the change in average airfares compared to the preceding month ranged from a fall of Rs320 to a maximum increase of Rs1,933.

While comparing the fares charged during the annual peak season - July - when demand is at its highest, with the maximum fares charged during the period under review, the committee observed that the fares in the period under investigation were lower than those charged during the peak season.

The committee also observed that the average fares of PIA are generally higher than the two private airlines.

Conclusion

It was concluded from the data analysis that on the routes examined the increase in airfares was not as exorbitant as alleged rather the increase was merely due to a rise in demand and the normal operation of revenue management system whereby last-minute bookings are charged a higher rate.



Additionally, the inquiry committee did not receive any evidence from consumers to substantiate a three-fold increase.

While finalising its conclusion, the committee took into consideration the fact that normal market conditions were restored once the strike was called off. 

Published in The Express Tribune, February 23^rd,  2016.

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