Govt removes fare caps for domestic airlines

05 Sep 2022

The government has removed fare caps on domestic airlines from 31 August, thereby giving airlines flexibility to regulate air fares for passengers.

Earlier in August, the aviation ministry issued a statement saying that after the review of the current status of domestic air travel and passenger demand, it has been decided to remove the fare bands regarding the airfares with effect from 31 August 2022.

The decision to remove airfare caps comes after careful analysis of daily demand and prices of air turbine fuel (ATF). Aviation minister Jyotiraditya Scindia tweeted that the air travel sector is now stabilising and that domestic traffic is poised for growth in the near future.

In May 2020, the government imposed lower and upper limits on domestic airfares, according to which airlines couldn’t charge a passenger less than Rs2,900 (excluding GST) and more than Rs8,800 for domestic flights with a total duration of 40 minutes or less.

The government imposed lower and upper limits on the prices of domestic flight tickets in May 2020, after the government lifted the restrictions on air travel as the Covid-19 wave subsided. In October 2021, the government allowed domestic flights to operate with 100 per cent occupancy but the price cap on airfares was not lifted.

Earlier, the airlines could not offer discounts because there were lower and upper price caps on domestic airfares.

Also, the price of aviation turbine fuel has been steadily coming down during the last few weeks after jumping to record levels, which may result in lower airfares.

Aviation minister Scindia has pointed out that these limits were imposed to protect economically weaker carriers as well as to protect passengers from being overcharged, but if stretched too far, there won't be airlines for fliers to board.

Welcoming the decision, India’s largest air carrier IndiGo said the removal of airfare caps will help airlines to increase their passenger load factor by offering discounted fares. Apart from this, other travel agents are also optimistic that ticket prices are likely to go down in the coming months, especially due to the upcoming festival season.

Giving details, an IndiGo spokesperson said the government’s decision to remove airfare caps is a welcome move and this will help airlines to follow dynamic pricing on airfares.

“It will also help airlines increase their passenger load factor by offering discounted fares on respective sectors, offering affordable fares. Overall, this will help airlines sustain with better PLFs (Passenger Load Factors) and benefit consumers as airlines will be able to offer affordable fares,” news agency PTI quoted the spokesperson as saying.

Vistara said it will continue to have a balanced pricing strategy for the passengers. Giving details, a Vistara spokesperson said in a free market scenario, airfares are an outcome of a multitude of factors, such as the dynamics of demand and supply, the operational environment, seasonality, cost, competition, market sentiment and taxation.

“As far as Vistara is concerned, we will continue to have a balanced pricing strategy,” the spokesperson told PTI.