New Delhi: The government’s move to remove price caps on domestic airfares from Wednesday (August 31) may impact prices of flight tickets this festive season. The removal of the price cap after almost two years will give flexibility to airlines on passenger fares. The aviation ministry informed about the development earlier this month. “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 August 31, 2022,” said the order from civil aviation ministry .
Will it bring down domestic fares?
Since there will be no price caps, airlines can charge whatever they see fit for passengers based on market forces of demand and supply. The airlines may opt for discounts on flight ticket prices to attract travellers. Earlier, airlines could not offer discounts due to lower and upper price caps on domestic airfare imposed by the government. This may translate into lower fares in the off-season to increase capacity or even higher fares in the busy travel season.
Why did the aviation ministry decide to remove caps on domestic airfares?
“The decision to remove airfare caps has been taken after careful analysis of daily demand and prices of air turbine fuel (ATF). Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future,” Aviation Minister Jyotiraditya Scindia tweeted.
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 & we are certain that the sector is poised for growth in domestic traffic in the near future. https://t.co/qxinNNxYyu
— Jyotiraditya M. Scindia (@JM_Scindia) August 10, 2022
ATF prices also witnessed a reduction in the last few weeks after jumping to record levels owing to the Russia-Ukraine conflict that began on February 24.
Why did the govt impose lower and upper caps on domestic airfares?
The ministry had imposed lower and upper limits on domestic airfares in May 2020 once air operations resumed after the nationwide Covid-19 lockdown. Even as the government allowed 100 per cent capacity deployment in October 2021, the pricing was regulated. The lower caps were imposed in order to protect the financially weaker airlines and the upper caps to protect passengers from high fares.
(With inputs from PTI)