Controversy over the fare cap situation in India has flared up again, with some airlines leading the discussion on the removal. Multiple factors are currently at play, potentially indicating that the Indian government may take any direction in the next few days as it is in discussions with the airlines.
While the Covid epidemic was hitting the aviation sector at its peak, the Indian government imposed some restrictions on airline capacity and fares in the interests of both airlines and passengers. When the Ministry of Civil Aviation (MoCA) lifted the ban on domestic power in October last year, it changed the fare cap within 15 days from the date of travel, which is still applicable today.
The goal of controlling both the upper and lower limit of ticket prices was to increase air traffic to help the industry recover from the epidemic’s effects. It was also designed to prevent the destruction of airlines with weak balance sheets, such as SpiceJet and Quick Go, which were more prone to the consequences of COVID than industry leaders such as IndiGo.
However, the voice industry in between is now becoming more assertive in favor of removing rent caps, significantly since the world situation has improved a lot since last year.
Some Indian carriers feel that the fare cap, which was introduced in the interest of the airlines, is now hindering the proper recovery of the sector. Indigo and Vistara are vocal against the regulations and urge the government to consider removing the restrictions altogether.
The Business Standard report quoted an airline official as saying,
“The price of airlines depends on the history of ticket pricing, which determines how much the customer and the market will carry. Prices vary depending on the group of passengers – leisure or business. The price of each group is very different. The limits set by the government are undermining that power. “
Airlines further argue that passenger demand has returned with the decline in the Covid incident and that in light of rising fuel prices due to the war in Ukraine, fare caps no longer serve the purpose. They see a vast potential to bring traffic up to 400,000 pre-epidemic marks per day, but at the moment, it is hovering around 300 to 350K.
But weak financial institutions like SpiceJet and GoFirst aren’t thrilled with the idea of dropping the rent cap altogether. Much depends on the government’s actions in the coming weeks. But where exactly does the government stand at the moment?
Discussions will be held soon
According to Business Standard, a meeting between the government and the airline CEOs could occur next week. According to a senior government official, “the final decision will be taken by Civil Aviation Minister Jyotiraditya Scindia.”
Until the beginning of February, when the government supported rent caps, Omicron was still a factor. State Minister for Civil Aviation VK Singh said the relaxation of freight capping was subject to the existing COVID situation and the demand of passengers for air travel.
Let’s see what the government decides in the light of the changed situation. As the Covid case intensified, passenger demand increased, and the Russia-Ukraine conflict increased fuel prices.