Rise in price caps shocking and insensitive to airlines: CAPA

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The Centre for Asia Pacific Aviation (CAPA), on Twitter, had criticised the civil aviation ministry’s decision on increasing the minimum and maximum fare slabs by 12.5%, saying that it is shocking and insensitive to airlines and added that the government is not interested in registering traffic volumes.

Decision by @MoCA_GoI to increase fare floors and caps by 12.5% is shocking and insensitive, to airlines and more importantly to passengers. Sends a signal that we are not interested in restoring traffic volumes #IndianAviation

— CAPA India (@capa_india) August 13, 2021

On Friday, the civil aviation ministry raised the minimum and maximum prices that airlines could charge in a 30-day cycle. There are no price caps fixed on fares sold beyond 30 days and airlines are free to charge their own prices.

The aviation consulting firm in June said that domestic airlines are expected to post a combined loss of $4.1 billion in FY 2022, similar to FY 21.

Increase in airfare would result in poor air traffic.

Airlines have also been allowed to deploy 72.5% of their capacity, which is an increase of 7.5%. With the latest order, minimum fare excluding taxes on the Mumbai-Delhi route has increased from Rs 4,700 to Rs 5,300. Similarly, the minimum fare on short-distance routes like Mumbai-Goa or Delhi-Chandigarh route has risen from Rs 2,600 to Rs 2,900.

The Business Standard reported that the lower fare bands for short duration flights is almost twice the amount charged during pre-Covid times. This would have a negative impact on the flight occupancy. So, before taking any further decisions, the government should look at removing fare bands for shorter routes and judge the market response.

As of August 1st, over 2,69,000 passengers have travelled by air, the highest since the resumption of airline services in May 2020. In the first seven days of August, the domestic air traffic rose over 53% over the same period in July as the government delayed in reintroducing fare bands. However, the growth in air traffic has slowed once the fare bands were raised.