All airlines flying to Colombo to file fares with CAA

The Director General of Civil Aviation (DGCA) has directed all airlines operating to Colombo to file their fares with the Civil Aviation Authority (CAA) in an effort to stop ongoing price wars and undercutting. 

The circular with relevant instructions was circulated among the airlines today afternoon, H M C Nimalsiri, DGCA, said. It spelled out that the regulator has observed some undercutting in the market and that the new measure is aimed at redressing the issue. It asks the airlines to file the fares they hope to apply to the Colombo market. 

It is widely known that there has been recently been significant price instability in the market. SriLankan Airlines has openly complained that it cannot compete with fares offered by Middle East airlines on the Colombo-Europe sector and will, therefore, stop flying to Frankfurt and Paris from October. 

The CAA hopes now to monitor the market. Respective bilateral air services agreements say that airlines cannot practice fares that drive competitors out of the market. The regulator can take the step of setting fares if compliance is weak but there has been no immediate decision in this regard. 

"There is no necessity for this sort of intervention if the markets are working," an industry source said. "But some intervention will happen if it is observed that undercutting is driving out competitors. It is not good for the consumer in the long run because it would allow the those that edge out competition to control the market."

It is learnt that while the CAA has not received formal representation from airlines in this regard, they have said on the airlines that it is difficult for them to maintain themselves given the cut-throat competition.