Wednesday, August 31, 2022

From today, govt has removed price caps on domestic airfares: Will flying be more expensive?

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.

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.

31/08/22 Free Press Journal

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