The government will remove the fare caps it imposed on domestic airlines in 2020 during the pandemic at the end of this month, the country’s civil aviation ministry said on Wednesday, lifting restrictions that will allow carriers to raise fares as well as offer deep discounts.
The government, in a rare move, imposed minimum and maximum fares based on a flight’s duration to prevent ticket prices from spiking when air travel was reopened following the lockdowns in 2020.
“After review of the current status of scheduled domestic operations, viz-a-viz passenger demand for air travel in terms of purpose specified in initial order… it has been decided to remove the fare bands notified from time to time regarding the airfares with effect from [August] 31,” said the aviation ministry’s order dated August 10.
Union minister for civil aviation, Jyotiraditya Scindia said the decision was based on market trends. “The decision to remove air fare caps has been taken after careful analysis of daily demand and prices of air turbine fuel. Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future,” the minister said in a tweet.
The floor and ceiling prices applied to bookings made in the next 15 days. Until its last revision in the bands in September last year, the upper and lower limits applied to bookings made over the next 30 days.
{{/usCountry}}The floor and ceiling prices applied to bookings made in the next 15 days. Until its last revision in the bands in September last year, the upper and lower limits applied to bookings made over the next 30 days.
{{/usCountry}}Aviation industry groups said the decision will lead to cheaper tickets. “CAPA India welcomes the decision to remove price floors and caps. This was long overdue. We hope that all carriers will maintain a sensible pricing regime and not revert to loss-leader fares. But yield dilution is inevitable despite airlines wanting a rational market,” said Kapil Kaul, chief executive officer of Centre for Asia Pacific Aviation (CAPA India).
When asked if the removal of the cap would lead to an increase in airfares, Kaul said: “I expect fares to fall because maintaining pricing discipline is very tough — increasing air fares is not feasible given that demand is soft.”
IndiGo, India’s largest airline by fleet size and passengers carried, said: “We are strongly supportive of this move as free market economics are good for both our customers and our investors”.
People in the travel booking business said the effect will need to be watched. “We look forward to the response of the removal of fare caps as this will rationalise the demand and supply. The fares will now be regulated by the market and consumers will be presented with competitive prices, hence normalising it for them. We hope this announcement will help the industry gain momentum in terms of growth and scalability,” said Bharatt Malik, senior VP, flights, at reservation website Yatra.com.