Are you planning to go on a vacation? If yes, then this news might intrigue you. The government has removed the cap on airline ticket fares after 27 months! Does this mean air tickets will get cheaper or more expensive? Let’s find out.
What’s Happening?
After a long time, there is good news for the Indian aviation industry. After about 27 months, the government removed the fare caps imposed on domestic flights in 2020.
But, Why Was The Cap Imposed in The First Place?
During the COVID-19 pandemic, everyone was confined to their homes. So, very few people were taking flights and travelling. Further, the restrictions on passengers taking a COVID-19 test before onboarding worsened the situation and led to a sharp fall in demand.
Now, we all know what happens when demand falls. And the same thing happened with the aviation industry. Air India reported a 78% fall in revenue during the April-June quarter of 2020. The Airports Authority of India (AAI), responsible for managing and maintaining civil aviation infrastructure across the country, reported a 92% fall in its revenue during the same time.
As the situation was not improving, airline companies started to lay off their employees to cut costs. But, even after doing all of this, the situation of a few airline companies was getting worse because they had to meet maintenance costs and other expenses and manage everything with low revenue.
There was a cut-throat competition between these airlines to attract passengers by offering the cheapest air tickets for a few destinations. While, for a few other destinations with fewer bookings, these airlines were charging a lot more.
Soon the government realised that to support financially weaker airlines and to protect passengers from high fares, they needed to impose lower and upper caps.
So, the base fare was decided. Under these guidelines, Indian airlines were not allowed to charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) for domestic flights of less than 40 minutes.
Now, these caps have been removed.
What Does This Mean For Airline Companies?
This decision will indeed offer relief to all the airline companies like IndiGo, SpiceJet Ltd, Air India, Vistara, and Akasa Air, as this will allow them to price tickets freely.
The next important thing is that removing pricing caps will offer a full-fledged recovery of the sector.
What Does This Mean For Passengers?
Removal of the airfare cap will surely positively and negatively impact travellers. A higher fair could be charged on routes with less frequent passenger visits, and a lower fair could be charged on frequently travelled routes. So, your fare depends on when and where you are travelling.
So, keep searching. Fortunately, you might come across a fantastic deal for your next vacation!
That’s it for today. We hope you enjoyed reading the newsletter.
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