A ministry order said the decision was taken after reviewing the status of domestic airline operations and passenger demand. Price bands were introduced in May 2020 to protect consumers from a possible skyrocketing of fares when airline operations were gradually restored during the pandemic and to give price stability to the highly competitive industry, which works on thin margins. The floor price was also meant to ensure that people travelled only for essential purposes. The price band was based on the approximate duration of travel.
Last September, the ministry made fare bands applicable only for tickets booked for travel within 15 days, exempting more advance booking of tickets from the price band. The band was meant to strike a balance between affordability to passengers and the viability of airlines. Carriers are currently facing the burden of high jet fuel costs driven by a surge in global prices and a weak rupee.
The lifting of price bands would mean pricing is entirely left to market forces, as was the case earlier. Most airlines have anyway reached high capacity utilization, suggesting that traffic is back to healthy levels. The aviation industry had suffered serious disruption amid the pandemic, with governments curtailing normal flight operations in a bid to slow the pandemic’s spread.
Full pricing freedom is expected to give airlines both the flexibility to competitively price tickets to grab more market share as well as to recover higher operational costs from the surge in jet fuel price.
Civil aviation minister Jyotiraditya Scindia said the decision to remove airfare caps was taken after careful analysis of daily demand and prices of jet fuel. “Stabilization has set in, and we are certain that the sector is poised for growth in domestic traffic in the near future," Scindia said in a tweet.
The aviation ministry also told airlines and airport operators to ensure that guidelines to contain the spread of covid-19 are strictly adhered to, and covid-appropriate behaviour is strictly enforced during travel.
Industry watchers welcomed the move. “We look forward to the response to the removal of fare caps as this will rationalize the demand and supply. 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," said Bharatt Malik, senior vice-president, flights, Yatra.com, a ticketing service provider.
