The Ministry of Civil Aviation has extended fare capping in domestic flights till May 31, 2021. The cap on airline capacity at 80 percent would also be maintained till the end of next month, the ministry said in a statement issued on April 26.
The order comes days after the airlines had appealed the government to reduce capacity to 60 percent as bookings had fallen due to the outbreak of COVID-19.
The aviation companies had, earlier in April, knocked at the doors of the government for help, as the second wave of COVID-19 began wreaking havoc just when they started recovering from the first blow.
They had raised three demands before the Civil Aviation ministry - financial help to keep running operations; two, reduce the capacity cap to 60 percent from the present 80 percent; and finally, 'strict enforcement' of the lower fare limit fixed by the government.
Explained | Why airlines want government to lower capacity cap
While bookings have already plummeted with the onset of second pandemic wave, the airliners have been seeking a cap of 60 percent capacity to prevent the big operators from reaping benefits.
For instance, if IndiGo continues to deploy 70 or 80 percent of its capacity, while others are forced to bring down theirs to 50 percent to reduce cash burn, India's biggest airline will keep getting even bigger at the cost of smaller ones.
Similarly, the request for fare capping was also aimed at preventing the bigger operators from sharply reducing the prices to prop up their numbers.
There were two upward revisions in the floor of airfare bands this year. First in February, when it was raised by 10 percent, and again in March, by 5 percent. This was at the time when demand was improving. But now bookings have gone down, and some airlines could have further reduced the fares to increase their bookings. This would have hurt those carriers who cannot do this due to their financial position.
The extension of fare capping, till at least May-end, is aimed at ensuring a level-playing field in the current situation.