From today onwards, there will be no lower or upper limit on flight ticket prices and airlines can fix charges based on their price capping policies and the demand on air routes. The central government's decision to remove the airfare fare caps on domestic flights comes after a gap of two years, during which the country was badly hit by the Covid-19 pandemic, which crippled the travel and hospitality industry. The airfare mechanism was introduced by the Centre to stop airlines from charging excessive fares amid the critical Covid period and save financially-struggling airlines from making more losses.
According to the civil aviation ministry, the final decision to remove the airfare caps was taken after analysing daily demand and the prices of air turbine fuel (ATF). So far, fare capping was applicable on a rolling basis for a 15 days cycle.
Civil aviation minister Jyotiraditya M. Scindia had earlier this month said that the decision to remove airfare caps was taken after a 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," said the minister.
The ministry, however, says that airlines and airport operators will ensure the guidelines to contain the spread of Covid-19 are strictly adhered to and Covid-appropriate behaviour is strictly enforced by them during travel.
Due to the outbreak of Covid-19 in India, scheduled domestic operations were suspended on March 25, 2020, which were subsequently resumed in a calibrated manner from May 25, 2020, with fare capping – lower and upper limits on the different sectors – to stop airlines from charging excessive fares.
As per the government, the fare band served the dual purpose of protecting the interests of the travellers as well as the airlines. While the lower end of the fare band helped airlines struggling with consistent losses due to low demand during Covid times, the upper end helped passengers as airlines couldn't charge more than that on days when demand was high.
The fare bands were revised from time to time in view of the substantial hike in the price of aviation turbine fuel (ATF). During the last two years, the Covid-19 pandemic adversely impacted the revenue streams of businesses including the aviation sector.
The ATF prices have been rising for many months now, putting a huge burden on airlines in terms of operational costs. Amid the Russia-Ukraine war, the ATF prices have gone to ₹1,21,915.57 per kilo litre from this month (Indian Oil data) from ₹53,000 per kilo litre in 2019-20. The ATF prices in Kolkata stand highest at ₹1,28,425.21 per/Kl.
The sky-high prices of ATF have led to a massive rise in operational costs for airlines. Jet fuel makes up about 40% of an airline’s total operating costs. Tepid demand, coupled with high operational costs, has led to massive losses for airlines.
