The government on Tuesday said the cap on airfares would be removed from August 31, after a span of about 27 months and just ahead of the peak travel season and festival period.
“The decision to remove airfare 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 said on Twitter.
The civil aviation ministry order said: “After review of the current status of scheduled domestic operations viza-viz 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 August 31, 2022.”
ATF prices have come down after jumping to record levels because of the Russia-Ukraine war.
The decision will bring relief to airlines including IndiGo , SpiceJet, Air India, and Vistara as well as new entrant Akasa Air. Jet Airways is also expected to resume flights next month.
“Airfares in the recent past have been higher by 20-30 per cent because of soaring crude oil prices. With the market stabilising in terms of demand, we expect some of that increase to start softening. Removal of lower and upper caps will stimulate the domestic aviation industry which is yet to reach pre-Covid levels,” Aloke Bajpai, group CEO and co-founder, Ixigo said.
“The fares will now be regulated by the market and consumers will be presented with competitive prices, hence normalizing it for them. We hope this announcement will help the industry gain momentum in terms of growth and scalability,” Bharatt Malik, senior, V-P, flights, Yatra.com, said.
Nishant Pitti, CEO & Co-Founder, EaseMyTrip said: “The removal of caps brings relief to the entire industry that will enable airlines to offer discounts.”
“Peak season gives airlines a reason to offer discounts and attract travellers which will encourage forward bookings. The airlines can also increase the fares when needed.”
CAPA India, an aviation consultancy firm, said: “We hope that all carriers maintain a sensible pricing regime. But yield dilution is inevitable despite airlines wanting a rational market.”