Indian fliers may not get to avail discount in the near future: Experts

Passengers might not be able to avail discounts while booking their flights in the near future

Passengers might not be able to avail discounts while booking their flights in the near future. The aviation ministry restricted the airlines from deciding fares on their own as the civil aviation ministry capped airfares range-bound after domestic travel resumed in a phased manner on May 24. This capping on ticket prices impacted discounts and special fares that airlines roll out from time to time to attract passengers and generate instant cash too.

The Ministry of Civil Aviation (MoCA) had capped domestic fares from May 2020. (Satyabrata Tripathy/HT Photo)

The Ministry of Civil Aviation (MoCA) had capped domestic fares from May 2020 and extended from October to December’20 and has further extended the same up to March 31, 20, 2021.

According to the report by brokerage Motilal Oswal Financial Services, the continuation of capping of airfares by the government in the long term may prove to be a huge dampener on the aviation industry as a whole, besides weakening sentiment for the regulated market.

The central government imposed a cap on airlines ticket prices at the time of resumption of domestic flight services in late-May initially for a period of three months. However, since then, it has already extended the period thrice with the latest one to March 31. The report had pointed out that the average ticket price in the last quarter of the previous year was at a discount of 7% to 23% to the median fares prescribed by the government, compared with a discount of 29% to 47% in the first quarter of 2020, when there was no ceiling on fares.

Ajay Prakash, ex-president of Travel Agents Association of India and CEO of Nomad Travels said, “The capping of airfares is unfair to the airlines. Even now when the ministry has reduced the capping per cent from 40 to 20, it will barely give some space to the airline considering the amount of huge loss the airlines have undergone in the past few months.”

Rajji Rai, chairman of Swift group of companies who have been in the travel and tourism industry for over four decades too said airlines were in an extremely poor state. “Even if the ministry decides to do away with the capping, the airlines will continue to suffer losses as a result of the Covid-19 pandemic. Passengers too are suffering, as the airlines have no money and are not able to refund them for their booked tickets for travel during the lockdown period.”

However, Jay Bhatia, vice president of TAAI said most airlines have already started announcing special promotional airfares post-April ‘21 and that their promos are marketing fares which attract travellers. “

This is a general phenomenon when airlines entice travellers with lower bucket airfares. However, the number of seats the airlines sell at those fares is restricted by the airline concerned. The purpose of capping the airfares we feel is to ensure that the airlines don’t oversell and create further losses. Further, the price band is given so that during these turbulent times they also do not exceed and overcharge and maintain the sanctity of the situation. Normally the airlines reduce the airfares only to fight competition or to promote routes not doing well. The capping of the price band has helped the travellers and the airlines to obtain an equal share of traffic. The airfares being average fares I think were of similar band range. However, capping of fares is not for Udey Desh ka Aam Naagarik (UDAN) flights,” Bhatia said.

He further added, “ Reducing the cap from 40% to 20% by the MoCA will give the airlines an extra edge, but the airlines must remember that the crisis is just over and to overcome the previous losses due to the pandemic will at least take over two years to recover fully. While they reduce the fares, they must also ensure that their costs should also be curtailed. By reducing the airfare they increase their flight loads which enhances their equity value notionally and reduces their profits.”