No upper, lower caps on domestic airfares from August 31: Centre

The restrictions were put in place in May 2020, when domestic flights resumed after a two-month gap, to prevent a fare war among airlines and also protect passengers from paying high prices on trunk routes due to the pent-up demand.

“After review of the current status of scheduled domestic operations vis-a-vis 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,” said an order issued by the ministry.

“The decision to remove airfare caps has been taken after careful analysis of daily demand and prices of air turbine fuel. Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future,” Civil Aviation Minister Jyotiraditya Scindia tweeted.

Jet fuel prices have been falling over the last few weeks after jumping to record levels, primarily due to the Russia-Ukraine war that began on February 24. On August 1, the price of aviation turbine fuel in Delhi was Rs 1.21 lakh per kilolitre, which was about 14 per cent lower than last month.

In May 2020, the government had created seven bands for domestic economy class travel, based on the duration of flights – starting from flights of up to 40 minutes, to flights of 180-210 minutes. For example, airfare could not fall below Rs 2,900 (excluding GST) or exceed Rs 8,800 (excluding GST) for domestic flights of less than 40 minutes. The upper cap was to protect passengers from high fares, while the lower limit was to protect the financially weaker airlines.

Later, the government limited the fare restrictions on a 15-day rolling cycle – the restriction was applicable only for a ticket for travel within 15 days of booking.

While welcoming the move, airline executives said the decision is not expected to have an immediate impact as current fares on most routes are not near the upper or lower limits.

“The fares will now be regulated by the market and consumers will be presented with competitive prices, hence normalising it for them. We hope this announcement will help the industry gain momentum in terms of growth and scalability,” said Bharatt Malik, Senior VP, Flights, Yatra.com.

Sectoral experts also believe the move will help airlines to lower the fares on certain routes to enhance their load factors. “The announcement will enable airline operators to price airfares solely based on the demand-supply of the routes, thereby showcasing the true nature of fare dynamics in the market. Airlines will be able to offer the benefit of lower pricing to customers on sectors/ routes where flight loads are comparatively lower than others. Certain flight routes – for instance metros like Mumbai, Delhi, Bengaluru, etc – are likely to witness surge in pricing,” said Indiver Rastogi, President & Group Head, Global Business Travel, Thomas Cook (India) & SOTC.