Moneycontrol PRO
Open App
you are here: HomeNewsBusiness

Domestic airfare caps removed from today after two years; what this means for passengers

The Civil Aviation Ministry had imposed lower and upper limits on domestic airfares based on flight duration when services were resumed on May 25, 2020, after a two-month lockdown due to the COVID-19 pandemic

August 31, 2022 / 03:23 PM IST
(Representative Image)

(Representative Image)

The decision of the government to remove lower and upper limit price caps on domestic airfares after almost two years comes into effect from August 31. The airfare caps were imposed back in May 2020 in view of the outbreak of the COVID-19 pandemic.

Earlier this month, Union Minister for Civil Aviation Jyotiraditya Scindia had tweeted, ''The decision to remove airfare caps has been taken after careful analysis of daily demand and prices of air turbine fuel (ATF). Stabilization has set in and we are certain that the sector is poised for growth in domestic traffic shortly."

The Civil Aviation Ministry had imposed lower and upper limits on domestic airfares based on flight duration when services were resumed on May 25, 2020, after a two-month lockdown due to the COVID-19 pandemic. At that time, airlines were instructed to 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 end of the fare band was put in place to help airlines that had been struggling financially due to travel restrictions. The upper limit was imposed so that passengers are not charged huge amounts when the demand for seats is high.

However, the cap has now been removed and the individual carriers can now charge for domestic flight tickets according to their respective price capping policies -- either discounted prices or higher charges depending on the carriers.

Close

"After review of the current status of Scheduled Domestic Operations viz-a-viz passenger demand for air travel in terms of the purpose specified in the initial Order No. 02/2020 dated 21.05.2020, it has been decided to remove the fare bands notified from time to time regarding airfares with effect from 31.08.2022," aviation regulator Directorate General of Civil Aviation had said in a notification on August 10 amid fall in ATF prices in the last few weeks.

ATF prices had jumped to record levels earlier this year, primarily due to the Russia-Ukraine war that began on February 24.

Jet fuel constitutes over 35 percent of an airline's operating costs and the increase in prices will put a fresh burden on cash-strapped airlines. Airlines pay about 30 percent taxes on ATF — 11 percent excise and an average VAT of 19 percent.
Moneycontrol News
first published: Aug 31, 2022 03:22 pm
Sections
ISO 27001 - BSI Assurance Mark