Financial Times

Domestic carriers advised against fare hike
The Civil Aviation Authority has advised domestic airlines against a fare hike they were seeking to cope with high costs owing to stiff competition for the shrinking number of passengers.

"We're not in favour of a fare increase," said H.M.C. Nimalsiri, Director-General of Civil Aviation and Chief Executive Office of the Civil Aviation Authority. "We have asked them to consider other means of coping with high costs."

All three domestic airlines operating passenger flights between Colombo and Jaffna had applied for permission to increase fares because of losses caused by the severe competition and the reduction in traffic with the opening up of road travel.

Nimalsiri said the request was considered given the difficulties faced by the domestic operators while being mindful of the interests of passengers. "We're still studying it but don't think it is advisable because when you increase fares there could be a decrease in the number of passengers. That's not the way to promote air transportation."

The CAA had asked the operators to see how they could improve yields with better aircraft utilisation, which was now not good enough. "No aircraft is used for more than five hours a day on average," Nimalsiri said. "The aircraft are on ground most of the time so their operational costs are high and they need a higher yield for break even."

The operators want to raise the economy class fare for a return ticket to Palaly to Rs 9,000 and business class to Rs 11,000. An economy class return ticket now costs around Rs. 7,500.

Fares fell to around Rs 4,500 earlier this when the competition on the Jaffna flights hotted up with the entry of Expo Aviation and Serendib to challenge Lionair which had long held a virtual monopoly on this route.

At the time it was feared that with all three operators struggling to fill up the flights in a shrinking market, a price war could cause all to lose money. The three operators subsequently reached a consensus on a common pricing structure. The civil aviation authorities also imposed a limit on the number of seats each operator could offer to ensure all three had enough business.

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