In a free market, any service or product is priced according to the law of demand. Higher the demand, higher the prices go, lower the demand, lower the prices. Very crude explanation of the law of economics this is. But it serves the point we are trying to make.
Now let us look at the current issue we have in our hands. To curb the spread of the novel coronavirus, the government wants to restrict the movement of people. At the same time, it also does not want to keep the aviation industry at standstill.
If airlines are given free hand at deciding prices, they will charge very low to take advantage of the surge in demand. And this surge in passenger travel will further aid in the spreading of the virus. So, vicious cycle it is.
The only solution Government thinks feasible is putting an upper as well as lower limit to prices. So that it limits the number of passengers using air travel as well as keeps the industry up and running.
Situation to remain same
According to sources, domestic ticket prices are set to remain high as all local airlines are in favor of the government continuing to set fare bands. The government has been deciding upper and lower limits on the basis of distance. This government control on prices has led to an increase in fares by up to 35% from pre-pandemic levels. The government has also been involved in regulating capacity since then, setting limits on how many passengers can be carried.
The airline industry seems divided on the issue of restoration of domestic capacity to 100% of pre-Covid levels from the current 72.5%.
The capacity limit might be relaxed in this month
During the middle of September, the government might take a call on the capacity limit being relaxed further. However, the limit may not be relaxed to 80% only.
It should be noted that currently, the number of domestic passengers is about half that before the pandemic.
Vaccination is playing a key role
“We expect that a large number of the country’s 300 million middle-class flying population would be doubly vaccinated by October,” an executive aware of the matter said. “This and a flat third wave of Covid would bring domestic aviation back to grow faster than expected if the restrictions are removed,” he further added
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