The Central government informed the Kerala High Court that airlines have the liberty to set airfares based on their operational feasibility, asserting that it refrains from intervening in the commercial aspects and the determination of airfare by the airlines.
In an affidavit, the union government said the dynamic pricing adopted by the airlines was a global practice and the change in prices are based on algorithms that take into account competitor pricing, supply and demand and other external factors.
Airlines are free to charge airfares as per their operational viability. The government does not interfere either in commercial aspects of airline nor fixing of airfare by them, the affidavit read.
In reply to a petition filed by Zainuabideen, challenging the increased fares by airlines operating in the Gulf sector during festival seasons, the central government stated that dynamic pricing is essential in influencing how airlines enhance their revenue per flight. The government emphasized that airlines are obligated to set reasonable tariffs in accordance with Rule 135 of the Aircraft Rules, 1937. This involves considering various factors such as operational costs, service characteristics, a fair profit margin, and the prevailing tariff standards.
Dynamic pricing is a global pricing strategy in which highly flexible prices for products or services based on current market demands. Businesses are able to stay competitive by changing prices based on algorithms that take into account competitor pricing, supply and demand and other external factors, it noted.
Airline ticket prices are determined by the demand and supply theory and are governed under the competition laws (Competition Act,) any anti-competitive practice by airlines is kept in check by the Competition Commission of India (CCI), which ensures to eliminate practices having adverse effect on competition, promote and sustain competition and protect the interests of consumers in India, it said.