Perils Of Learning To Fly

The Chennai floods last week showed us community spirit -- as well as its flip side. As people lay open their houses for the almost 6 million effected by the floods, prices soared high for most commodities, adding further havoc.

For people looking to go out of the city to safer locations or for those who wanted to come back to help families, there was a catch—airline prices had skyrocketed, some almost reaching Rs 1,20,000 for a flight from Bangalore to Bombay. This was rightly met with the dismay and anger that it deserved as people lashed out at the airlines and third party operators.

The situation threw up an oft argued question during times of disasters—should the government formulate a regulatory framework that keeps in check the rising prices in extreme situations such as these. The irony that talks for such regulatory bodies only ?come up when one is in the midst of a disaster is not lost on everyone.

One of the most common arguments for such increase in prices is to let the forces of demand-and-supply take its course. When demand rises, so do the prices. The market is cohesive enough to absorb any additional financial burden. The market deciding the prices is after all the fairest way to set these prices.

While such an argument definitely carries weight, one ignores the fact that a demand and supply market only functions in a situation where the consumer is provided with a choice. It is important for the consumer to have options; if a flight is too expensive to fly on, there needs to be an alternate available. But what happened was a cartel like situation where airlines seemed to have unanimously decided to raise prices to unreasonable amounts

Price gouging during disaster situations is not a new phenomenon. Take for example the recent earthquake that hit Nepal or the Uttarakhand floods last year. Price hikes by airlines were a common phenomenon before the government had to step in and restrict prices. One asks then, should the government have regulated prices during the recent Chennai floods?

Yet, what business does the government have intervening into a free market, even in a situation of tragedy? “Airlines are functioning in disaster situations as well and face a crisis where flying gets costlier for them too. There is a clear play of demand and supply and the government has no business interfering with that,” says Mark Martin of Martin Consultancies, an aviation consultancy agency. He goes on to say that airlines do charge such high prices; they are the ones that will bear the brunt of a loss of trust by their customers, saying that this is how market forces come into play.

Predatory pricing though hit the poorest, the ones that need such services the most. Satyan Nayar of The Association of Private Aircraft says that while airlines are not regulated by government guidelines to set prices for flights, it remains a misuse of tragic circumstances. When airlines are confronted with questions around the price hike, the usual reply involves indulging in a blame game?

For example, the tweet where Jet Airways claimed that the increase in prices was the fault of the third party website Make My Trip? then later claiming it was a systems glitch. Spice Jet too on being asked by Outlook on the price hike replied saying that their prices were in compliance with the Directorate General of Civil Aviation and as they moved up the price bracket because of the tragedy (a bracket set by the DGCA itself), the government authority was notified at all times.

The tragedy of these floods call into plays an immediate need of a regulatory system by a government. It should specifically be designed to provide a framework for corporates to function in such extreme circumstances.

More importantly, the remains a wide gap in consumer help groups in the country which are equipped to handle such situations. “Airlines will never charge such exorbitant prices if the consumers have a strong representative body. For the airlines to succeed, consumer support s foremost,” says Martin.

To conclude, in times of natural disasters, companies need to account for emotional factors. This can only be achieved by a thought out regulatory framework.