From today (August 31) onwards, the Government of India is set to lift the cap on domestic airfare prices after more than two years, in a move that is likely to impact all flyers. The move is designed to allow airlines more flexibility to raise fares, in an environment where fuel costs - the primary factor determining cost of air travel - are uncomfortably high.
“After review of the current status of Scheduled Domestic Operations viz-a-viz passenger demand for air travel, it has been decided to remove the fare bands notified from time to time regarding the airfares with effect from 31.08.2022," the Ministry of Civil Aviation had earlier stated in a circular released on August 10.
Caps on capacity and fares were introduced in May 2020 following the resumption of air travel after the nationwide lockdown. The government allowed 100 per cent capacity deployment in October last year, but it continued with the pricing regulation, citing an adverse cost environment.
The government regulated fares by imposing a minimum and maximum band based on the flight's duration to prevent ticket prices from spiking due to pent-up demand arising from an easing of restrictions on air travel.
Will flying be more expensive?
Prior to this move, a cap on the fare was applicable for tickets sold in 0-15 days on a rolling basis.
While there is risk airfares could be hiked, airlines are more likely to offer deep discounts on tickets to fill up their flights and encourage more flyers during the current lean period, in order to attract more flyers.
India's aviation sector fastest growing in the world
In the week ending August 8, India was the fastest growing aviation market with a capacity of 3.8 million seats, up 29 per cent from the same period a year earlier – this is still 5 per cent below the 2019 level, according to aviation data firm OAG.
India’s airlines could continue facing headwinds in the current financial year, with losses expected at $1.4 billion to $1.7 billion, but down from about $3 billion in 2021-22, according to CAPA India.
Despite a few setbacks, 2022 looks to be a landmark year for Indian aviation. The country’s newest budget carrier Akasa Air, backed by billionaire Rakesh Jhunjhunwala, launched flights on August 7.
The airline’s initial network includes a total of 56 weekly flights between Mumbai and Ahmedabad and the southern cities of Bengaluru and Kochi on its new Boeing 737 MAX planes.
Jet Airways, which received its operator’s license in May, is aiming for a September launch. The airline was forced to ground all flights in 2019 due to mounting losses as it attempted to compete with low-cost rivals.
