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A Crisil report has said that Indian carriers may post a combined loss before interest and tax of Rs 93,000 million in the current financial year, the highest in a decade.
Confirming the inquiry, a senior official said, “We found that the pattern of pricing of tickets by all airlines were similar. This raises questions on whether pricing is competitive or airlines are following a similar pattern. We are looking into pricing by all airlines.”
Airlines follow a bucket system in pricing their tickets, wherein fares are lower if the ticket is booked in advance. Tariffs increase when the travel is booked closer to the date of departure.
Airlines say that this is a software-based system, which takes into account historical booking patterns while pricing the tickets. Airlines have also raised an issue that IndiGo is adding capacity, thus, making its competition even more tight on various routes.
IndiGo is India’s largest airline by market share.
While airlines may say that the fare system is software based, analysts say that the algorithms are decided by human intervention, and agencies need to investigate these cases to find collusion among airlines, if any.
“Specifically in relation to the airline Industry, it is important to also understand the way algorithms are designed since the programmes are ultimately written or taught by humans in order to derive the best outcome for their employer, which may not always be the best outcome for the market,” said Avimukt Dar, Partner, Indus-Law, a law firm.