ORDER UNDER SECTION 26(6) OF COMPETITION ACT, 2002

1. The present order relates to two different matters before the Commission in which it has been alleged that by acting in concert, Indian domestic airline operators have colluded to raise airline fares together.

2. Out of these two cases, RTPE case No. 5 of 2009 relates to an investigation before the office of Director General, Investigation and Registration - DG(I&R), Monopolies & Restrictive Trade Practices Commission (hereinafter referred to as "MRTPC") taken up on the basis of news reports published in the 'Financial Express' and 'Economic Times' on 11.02.2009 that airline operators in India had simultaneously withdrawn promotional offer fares of Re. 1/- and Rs. 99/-, and hiked their air fares by 25 per cent across the board in February 2009. The other case, suo motu case No. 2 of 2010 relates to allegations in media that acting together the airlines had raised their fares around diwali season of 2010, cognizance of which was taken up by the Commission and an order was passed directing Director General (DG) to conduct investigation into the matter.

3. The allegations and findings of investigation conducted by DG in each of these cases are discussed below in the order.

3.1 RTPE Case No.5 /2009

3.1.1 RTPE case No. 5 of 2009 was received by the Commission on transfer from the office of DG (I&R), MRTPC under section 66(6) of the Competition Act, 2002 (hereinafter referred to as the 'Act').

3.1.2 As per the directions of MRTPC, DG (IR) conducted a preliminary investigation into the matter. In response to the notice of DG (IR), submissions were made by various domestic airlines denying the allegations of cartelisation.

3.1.3 In its replies, Air India submitted that as the Indian domestic air travel market had gone through a significant decline since the summer of 2008 due to global financial crisis, it was compelled to review the fare structure in January 2009 in a bid to stimulate demand and with a view to remain in competition. However, even reduction in the airfares did not result in increase in carriage and its daily passenger carriage declined by 253 per day between December 2008 and January 2009. Since the fares were increased by its competitors in the month of February 2009, it was also compelled to increase its fares to meet out competition. However, in many sectors, the revised fares charged were still lower than that of the competitors. Moreover, it also continued to offer lower fares against the tickets purchased well in advance for reaching out to the segments in the market which are known to be price sensitive.

3.1.4 It was submitted by Kingfisher Airlines Ltd. that it had not increased the fares during the period of reference but only restored the fares to December 2008 levels. The Airline also submitted that it had lowered the air fares during December 2008 with a view to boost the demand. However, lower fares did not yield the expected result; rather its traffic got reduced by 14% compared to the traffic during January 2008. It further brought out that the company was incurring a loss because of economic slowdown across the globe. Therefore, fares were raised in February 2009 to generate as much revenue as possible to cover the costs. It was also brought out that it follows a dynamic pricing model by which consumers are benefited by paying lower fares in case they book tickets in advance. Kingfisher Airlines also argued that due to factors like increased cost on account of aircraft lease, maintenance as well as increase in airport charges it was compelled to raise the fares which had nothing to do with the fares of other airline operators and furthermore it was not aware of any collective increase in air fares by all the domestic airlines.

3.1.5 Denying the charges of cartelization, Inter Globe Aviation Ltd. (IndiGo), replied that it has never acted in a collusive manner, although the fares offered by the competitors are definitely a determining factor in determining its

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