Government to begin discussions on stripping the airfare price caps soon

The airfare price caps were brought in when services were reinstated on May 25, 2020, following a two-month lockdown due to the COVID-19 pandemic. The civil aviation ministry put lower and higher limits on internal prices based on flight time to help both the passengers as well as airlines. 

India’s Aviation Turbine Fuel (ATF) prices were raised by a steep 16% taking them to record highs. Airlines have been feeling the pinch due to higher jet fuel prices as it comprises 30-35% of their running cost. 

Last month, aviation minister Jyotiraditya Scindia said fare capping was necessary to protect passengers from being charged exorbitant fares.

The government has started discussions with airlines about the removal of price bands for passenger fares. The talks have started after some airlines renewed their demand to remove the pricing caps, claiming the regulation is a hurdle to the full-fledged recovery in domestic air traffic.

“Some airlines have requested for the removal of the lower and upper limits on domestic airfares and if there is no opposition from other airlines, a decision on the removal of the fare caps will be taken by the end of the month,” the report quoted a senior government official as saying.

The Union government’s Friday decision to extend and increase fare caps would largely benefit smaller airlines with weak finances, airline executives and industry experts said.

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The civil aviation ministry’s notification allowed airlines to sell more seats on domestic routes and charge higher fares, effectively enabling airlines to deploy more flights. The fare caps have been in place since May 2020, but some carriers, especially those with larger market share, want price caps to go now.

Passenger footfall is one of the determining factors of an airport’s revenue. Higher the number of passengers and the number of flights, the higher the landing and parking fees charged by the airport. As long as the caps are in place, air travel will never go back to what it was in the pre-pandemic era.

Airlines allege that the regulation is a hurdle in the recovery of losses that the airlines have incurred over the past two years. It is learnt that CEOs of some airlines are scheduling a meeting with government officials to take this further.

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