Explained: What the removal of airfare cap means for passengers?

New Delhi, Sep 01: The cap on air tickets for domestic flights has been removed in the country from August 31, rising a lot of questions in the mind of passengers who are now speculating that the air tickets would now get more expensive with this change. In the last two years, airlines could not 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, but this decision, the airlines are now free to fix the ticket price.

Will Air Tickets Get Cheaper or Expensive?

For now, it looks like it is a mixed bag for the passengers. Experts say that it works based on the demand-and-supply basis. Hence, the tickets might be sold at cheaper price during off season while it could go up during festival season, weekends or long-weekends.

Jet fuel increased to record levels after the war between Ukraine and Russia broke out. However, the rates have come down drastically in the recent past. Since Jet fuel makes up for about 40 per cent of the operating cost of an airline, the companies could not offer big discounts. If the price of the fuel drops further, the ticket price might come down, some experts believe.

Low-demand routes, flights with poor loads, and new routes could see discounts, airline executives told Business Standard. Some industry observers say that the price might go up on select flight routes.

There is also a possibility of cash-crunch airlines might offer tickets at lower rates to ensure that there is a cash flow.

What the Cap was meant for Airlines?

The cap on airfares was imposed by the ministry on May 21, 2020. The flight duration was divided into seven categories - 0-30 minutes, 30-60 minutes, 60-90 minutes, 90-120 minutes, 120-150 minutes, 150-180 minutes, and 180-210 minutes.

In the last two years, airlines could not 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.

The lower caps were there to protect the financially weaker airlines and the upper caps to protect passengers from high fares, but airlines were free to fix their own fares for bookings beyond 15 days.

However, the airlines are now free to fix the ticket price.

The reason behind Centre's decision to remove price caps

The decision to remove air fare caps has been taken after careful analysis of daily demand and prices of air turbine fuel (ATF), Aviation Minister Jyotiraditya Scindia said earlier. "Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future," he added.