In 1988 I flew to attend my sister’s wedding in Chennai. I paid Rs. 5000 for a return ticket. In 2016 I went to attend my nephew’s wedding in Chennai I paid Rs. 5000 for the same ticket.

That is what competition does to pricing.

However competition does one more thing – it kills the weak players and leaves only the sensible players in the field. So if Jet Airways, Spice Jet, Air Asia, Vistara, Indigo and Air India are the players in the field they compete amongst themselves. Great for the user he gets a good price.

However this takes its toll. So they go back to the shareholders for funds – sensible shareholders say “show me a business plan of profitability”. So either they make a sensible plan or withdraw from the market.

There is one player – Jet Air – who is not getting money from the shareholders. This is easy to understand – there is no profit visible on the horizon.

There is one player who need not worry about the shareholder. It is Air India.

So if the capacity of Air India and Jet Air were to disappear (if you do not pay salary and lease rent, the capacity vanishes) the players who remain start or can start increasing prices. Enough to cove costs, margins, and a safety net for rising oil prices.

People will crib. For shorter distances they will (should) shift to trains (Mumbai to Surat, Baroda, Ahmedabad for example) – which will release capacity in planes.

So it is a game of supply and demand. It will take time for capacity to be added – and it will get done at reasonable prices. Reasonable for the consumer and reasonable for the manufacturer – and price discovery will happen.

Right now I expect air fares to go up…till Jet Airways problem is not sorted out (assuming it can be sorted out))…I seriously do not think there is any solution.

The worst thing that the govt can do is to pump in money to ‘rescue’ Jet Airways. That means nothing. The best employees would have left. The offices would be on rent – it would be taken away by the landlords. SBI will auction the owned aircrafts. I am sure Air India would lose a lot of money – for passengers who shifted from Jet to AI but Jet did not pay them!

Then there are vendors and employees. Worse off are those people who have booked a ticket on Jet Airways for 2 months later. They will neither travel nor will they get a refund. Unsecured creditors – will get nothing….

And then there are those like me who will lose a few miles – I have enough to make a round trip to London…

so we will all crib…but then this is how Economics is supposed to work is it not?

I had a Hdfc bank – Jet branded card…I had changed it last year to get a Hdfc bank Diners Club card….so