The civil aviation ministry on Wednesday said that limits imposed on domestic airfares will be removed from 31 August, after a span of approximately 27 months. However, airlines will be free to decide what to charge passengers post 31 August.
Mansi Lall, Research Associate at Prabhudas Lilladher Pvt Ltd, said, “We believe this to be a positive move from the government. This comes at a time when fuel prices are stabilizing (ATF price down 13% from last month) and demand inching back to pre-COVID levels.”
“We believe that the low-cost carriers will continue to maintain attractive fares in lean travel periods. However, with the festive season coming up, higher fares could aid margins as fuel costs remain much above the pre-pandemic levels,” the person added.
“The decision to remove air fare 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 today while attaching an order copy.
Jet fuel prices have been coming down during the last few weeks after jumping to record levels, primarily due to the Russia-Ukraine war that began on 24 February.
On 1 August, the price of ATF in Delhi was ₹1.21 lakh per kilo-litre, which was around 14 per cent lower than last month.
The government, in a rare move, had regulated airfares by imposing a minimum and maximum band based on the flight’s duration to prevent ticket prices from spiking due to pent-up demand arising from an easing of restrictions on air travel.
The cap on airfares was imposed by the ministry on 21 May, 2020.
For example, airlines at present cannot charge a passenger less than ₹2,900 (excluding GST) and more than ₹8,800 (excluding GST) for domestic flights of less than 40 minutes.
The lower caps were there to protect the financially weaker airlines and the upper caps to protect passengers from high fares.
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