After almost two years, the government has decided to eliminate the lower and maximum price ceilings on domestic flights, and this decision will take effect on August 31. The price limitations were put in place back in May 2020 in response to the COVID-19 pandemic epidemic.
Domestic Airfare Caps Removed
Jyotiraditya Scindia, the Union Minister for Civil Aviation, had tweeted earlier this month that the decision to eliminate airfare caps had been made after thorough consideration of daily demand and air turbine fuel prices (ATF). The sector has stabilized, and we are confident that soon domestic traffic will increase.
After a two-month lockdown because of the COVID-19 pandemic, services resumed on May 25, 2020, with lower and upper limits on domestic airfares based on flight time. At that time, airlines were told not to charge a customer for domestic flights lasting under 40 minutes less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST).
The lower end of the ticket range was established to aid airlines that were having financial difficulties as a result of travel restrictions. The highest limit was set to prevent passengers from being overcharged during periods of strong demand for seats.
Charges for Domestic Tickets
Since the cap has been lifted, individual carriers are now free to set their price caps for domestic flight tickets, which may result in lower costs or higher rates depending on the carriers.
After reviewing the current status of Scheduled Domestic Operations about passenger demand for air travel in terms of the purpose stated in the initial Order No. 02/2020 dated 21.05.2020, it was determined to eliminate the fare bands alerted from time to time concerning airfares with effect from 31.08.2022, aviation regulator Directorate General of Civil Aviation said in a notification on August 10 amid a decline in ATF prices in recent weeks.
Early this year, ATF prices spiked to record highs, largely as a result of the Russia-Ukraine war that broke out on February 24. Over 35% of an airline’s operating expenses are related to jet fuel, therefore the price hike will further impact already squeezed airlines. Airlines pay about 30% in taxes on ATF, consisting of an average VAT of 19% and an excise tax of 11%.