The Directorate General of Civil Aviation (DGCA) on Tuesday ordered low-cost carrier SpiceJet to immediately stop the sale of discounted tickets, calling it “predatory pricing” by the airline an attempt to “deceive the public”.
SpiceJet is staring at a financial collapse after its efforts to find an investor failed. It needs an immediate infusion of about Rs. 2,000 crore to survive.
DGCA chief Prabhat Kumar issued the order after SpiceJet announced a three-day sale on Tuesday morning slashing base fares across its domestic network to `1.
On selected seats, the airline wasn’t even charging the fuel surcharge from passengers and only statutory taxes and fees.
“We wrote to SpiceJet asking the basis of `1 fare. In its reply, the airline said the fares were for a very a limited inventory of about 1.7% which would mean 1 or 1.5 seats per plane,” a DGCA official said.
The regulator arrived at the view that the scheme was to “deceive” public, which would create a stir in the market.
“The predatory pricing would distort the aviation market and would lead to a mad race among airlines.
This amounts to malpractice under Rule 135 of Aircraft Rules. SpiceJet was ordered to immediately stop the sale,” he added.
“We do not believe the our pricing was predatory in nature since it is with the intent to stimulate demand, and is not intended to reduce or eliminate competition; with a market share of 20%, we are not in a position to be predatory,” SpiceJet said in a statement.
“Airlines such as Air Asia and Tiger Airways have had numerous fare sales including for their flights originating in India where the base fare was `0/ (excluding fees and taxes, but including fuel surcharge). In the past domestic airlines in India have also come up with similar offers where they charged `1 fares,” it said.
SpiceJet, on Tuesday, cut fares for the fifth time since January 21. The airline announced discounted fares, starting at `1 (not including statutory taxes and fees), available for booking till April 3 for travel between July 1, 2014 and March 28, 2015.
In addition, the airline was also offering fares for `799 and `1,499.
The sale was an instant hit. All `1 and `799 tickets had been sold out by evening. “This sale is different from the previous ones as the travel period extends up to the first quarter of 2015,” Subhash Goyal, chairman, STIC Travel Group.