Economy, Business And Markets

Airfare Liberalization Gets Going

Airfare  Liberalization  Gets Going
Airfare  Liberalization  Gets Going

Under legislation officially enacted last week, Iran Civil Aviation Organization decided to deregulate air ticket fares on 170 domestic routes (66% of all routes), while tickets for 87 routes will be sold at prescribed rates.

In fact, the organization announced that all air ticket prices will be liberalized by the end of the current Iranian year (March 19, 2016), as part of the Fifth Five-Year Economic Development Plan (2011-16).

This gave rise to public confusion as to the impact of deregulation on their future flying experiences—the ticket prices, to be precise, Mehr News Agency reported.

To address these concerns, CAO chief, Ali Abedzadeh, said variation in fares is a natural consequence of airfare deregulation, but it does not necessarily entail an increase in ticket fares.

“These measures are aimed at improving the quality of air transport services and we have no option other than deregulating the fares,” he said.

The CAO official said deregulated fares will offer better and more options to passengers, as they will be free to choose among flight times, ticket fares and additional services.

"There is a popular misconception that transportation is a luxury commodity. Rather, it is a basic commodity and the market needs to think ahead of its consumers. There are times when people want to get to a location regardless of the costs,” says economist Mousa Ghaninejad.

“A look at airfares in Europe and the US shows that on many occasions, they are cheaper than train or other modes of transportation. But in our country, the pricing system has prescribed rates that are fixed for all fights at all times,” Donya-e-Eqtesad daily quoted Ghaninejad as saying.

"The regulated system escalates corruption, string-pulling and bribery. Desperate consumers often have to bribe their way into airplanes if need be.

The economist noted that the government would help create competition among airlines by reducing its control and this would add to the companies’ efficiency.

In developed countries, passengers have to pay higher prices for flights scheduled for the next two or three days, but they would pay much less if they buy the tickets months or even a year in advance.

A university professor said airfare deregulation would be beneficial to airlines.

"Who knows? Maybe modern pricing system in the aviation industry becomes the trailblazer of new pricing system in other industries," Ali Maziki added.

“Deregulation would save costumers considerable amounts of money on every ticket, enabling them to travel more regularly. Thanks to lower fares resulting from a competitive airline marketplace, air travel would be freely available for all.”

All in all, proponents of the motion believe that ticket fare liberalization would increase competition between airlines, which in turn will help raise the quality of services.

Airlines would also be able to offer greater air travel services, thanks to an aviation marketplace in which they are free to provide services when and where demand exists, without having to seek permission from central planners.