Thursday, December 23, 2021

Airlines say caps on ticket prices hamper recovery in air passenger traffic

Some domestic airlines have renewed their demand for the removal of price bands for passenger fares, claiming the regulation was delaying a full-fledged recovery in domestic air traffic and stopping them from lowering ticket costs.

The demand comes just days after daily passenger numbers climbed to 360,000 to 380,000, or about 90% of pre-pandemic air traffic.

Civil aviation ministry officials ruled out scrapping the fare bands any time soon given the emergence of the Omicron variant of the COVID-19 virus that has raised concerns of a third wave of the pandemic.

“The current regime of regulated prices is not only hampering the recovery of corporate travel, but is also delaying the unbundling of fares,” a senior executive at a domestic airline said on condition of anonymity.

The Civil Aviation Ministry sets the lower and upper airfare limits for travel within 15 days of booking. The bands do not apply to travel from the 16th day of booking.

The price bands were introduced by the government when airlines were allowed to resume operations after the 2020 COVID-19 lockdown. The move was meant to curb predatory pricing by larger airlines, which smaller rivals are forced to follow at the cost of their financial health to attract passengers.

The airline executive cited above said that although the Directorate General of Civil Aviation (DGCA) had allowed airlines to unbundle certain services such as preferential seats and meals from the base fare in February, airlines hadn’t been able to do so because of the floor prices set the by the regulator.

“The fare bands are now only limiting the ability of airlines to offer lower fares to customers,” the executive said.

While segments like leisure travel and planned travel are showing signs of recovery, the high fares applicable on flight tickets booked within 15 days were limiting recovery in corporate travel and impromptu weekend travel plans, he added.

Another executive at a domestic airline said the fare caps were hindering the ability of airlines to offer attractive incentives for customers that would encourage them to travel again.

To be sure, not every airline is in favour of the removal of caps. Airlines such as IndiGo, the market leader, and experts have called for the withdrawal of fare regulation. Smaller airlines like SpiceJet favour their continuation until passenger traffic returns to pre-COVID levels.

23/12/21 Yaruqhullah Khan/

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