Domestic Airfares Will Rise By 30% As Govt Allows Lower, Upper Cap On Fares, Capacity
The ministry of civil aviation has extended the fare cap applied on domestic airlines until March 31, 2021.
In order to keep a check on the losses incurred by airlines due to a capacity cap of 80% on passengers’ operations, the aviation ministry issued an order on Feb 11, as per which the airfare prices will be increasing.
The ministry had set a price band on airfare with upper and lower caps, on resuming domestic air travel across the country on May 25, 2020, after a temporary hiatus of two months due to the Covid-19 induced travel restrictions.
Price Caps on Airfare Increase
On May 25, 2020, domestic air travel across the country was resumed, with the Ministry of Civil Aviation (MoCA) setting up a price band on fares.
There were 7 bands introduced, classified based upon the flight durations, from 40-60 mins to 180-210 minutes.
You can find the initial price slabs here.
On Thursday, Feb 11, the Directorate General of Civil Aviation (DGCA) issued an order to increase the upper and lower price caps on airfare by up to 30%.
The revision of price caps, which have been put into immediate effect, will increase the airfare.
For instance, for flights with travel duration between 90-120 minutes, the floor price has been increased from Rs 3,500 to Rs 3,900, while the ceiling price from Rs 10,000 to Rs 13,000.
The government had introduced these price bands to keep a check on airlines charging exorbitant prices from travelers in a time when passenger capacity is at its least, and to ensure no predatory pricing among the airlines.
Why Are the Price Slabs Increased?
Currently, the government has allowed airlines to operate only at 80% of their capacity.
This is to keep a check on the safety while traveling. Initially, when the air travel was resumed on May 25, 2020, airlines were allowed to operate only at 33% of their capacity, which steadily increased with time.
However, airlines not operating at their 100% capacities have ceased their profitability. Thus, an increase in price band will help airlines maintain their balance sheets.
Fare Band Not a Permanent Move: Hardeep Puri
Replying to a question in the Parliament on Feb 10, the Union civil aviation minister Hardeep Singh Puri stated that fare band on domestic flights is the need of the hour and not a permanent feature.
He added that whenever airlines start operating at their pre-Covid capacity levels, the air price bands will be removed.
“We are now confronted with an interesting situation. On the one hand, some of the carriers want us to open full capacity, whereas others would like to go slow.
The fare band is not our intention and can not be in an open market deregulated situation to have the fare band made a permanent feature”, stated the minister.