Price-Fixing Probe Risks Fresh Blow to India’s Airlines

India’s antitrust agency has opened fresh probes of airlines and tiremakers over allegations of cartel behavior, the regulator’s Chairman Ashok Chawla said.

All domestic carriers are being reviewed, Chawla, 64, said in an interview in New Delhi on Wednesday. He didn’t name any airlines or tiremakers. If cartels are found, fines of as much as 10 percent of a company’s revenue or profit could be imposed.

The charges, if proven, would be a blow to India’s debt-laden airlines, which have lost an average of $22 every time a passenger has stepped on board in the past seven years. Chawla said he expects many more merger and acquisition antitrust cases over the next five years, signaling a bigger role for a watchdog that only became fully functional in 2009.

“Let’s be honest, airlines do enter into cartels,” said Mark D. Martin, chief executive officer of Dubai-based aviation advisory company Martin Consulting LLC. “How else do you explain exactly the same price charged by all airlines on a peak travel market like Delhi-Goa?”

While Indian carriers have sometimes offered base fares of as low as 2 cents, spot fares have increased since SpiceJet Ltd. reduced its schedule late last year and after Kingfisher Airlines Ltd. ceased operations in 2012.

Jet Airways, the biggest publicly listed carrier in India, fell as much as 2.7 percent and closed 1.6 percent down at 433.15 rupees in Mumbai. SpiceJet rose 0.3 percent.

‘Severe’ Competition

“Airline pricing in India is now, more than ever, some of the most transparent and competitive in the world with so many discounts and promos,” SpiceJet said in an e-mailed reply to questions. Competition “has never been more severe” and cartels usually do the “opposite,” which is raising fares.

Jet Airways India Ltd. spokesman Manish Kalghatgi declined to comment while IndiGo spokeswoman Sakshi Batra didn’t immediately respond to requests for comments late on Wednesday.

Cartelization is the “worst kind” of conduct, Chawla said. He was the top bureaucrat in the Aviation and Finance Ministries before becoming head of the antitrust body in 2011.

The commission probed airlines in 2013 and 2014 and didn’t find evidence of cartels, he said. The latest investigation, which will take about two months to complete, was initiated after a complaint by a parliamentary committee, Chawla said.

IndiGo is the country’s largest carrier by market share, with just over 36 percent of domestic passenger traffic in December, followed by Jet Airways, Air India Ltd. and SpiceJet.

‘Laughable’

The Indian government is considering temporarily capping minimum and maximum airfares offered by airlines such as state-run Air India and the local unit of AirAsia Bhd., a senior aviation ministry official said Dec. 22.

Evidence against any cartel includes market fragmentation, overcapacity and losses, said Amber Dubey, partner and head of aerospace and defense at KPMG in India.

“If Indian carriers were indeed a cartel, it would go down in history as one of the most laughable cartels of the world,” Dubey said.

The regulator is also probing bank savings account rates.

The agency previously investigated tiremakers in 2013. It didn’t find any illegal behavior, Chawla said. The biggest two Indian tiremakers by market capitalization are MRF Ltd. and Apollo Tyres Ltd., according to data compiled by Bloomberg.

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