DGCA will remove the fare caps on domestic flight tickets from August 31

The government had June started discussions with airlines about ridding of the price bands for passenger fares.

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The current fare caps on domestic airline tickets will no longer apply from August 31 under the Directorate General of Civil Aviation’s decision.

“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,” the DGCA said in a notification.

The government and airlines began talking in June about getting rid of the price tiers for passenger fares.

The negotiations got underway after certain airlines reiterated their demand for the pricing limitations to be lifted, arguing that the rule prevents a full recovery in domestic air traffic.

Fare capping, according to aviation minister Jyotiraditya Scindia, is required to prevent customers from paying excessive fares.

“I have an environment where ATF prices are still very high, I want to protect the passengers and also the airlines… I have to ensure that the environment is stable and I need multiple airlines to proliferate in my country and then I need to create that arena where multiple airlines can operate,” Scindia had said.

After numerous airlines reiterated their call for the pricing limitations to be lifted, discussions on eliminating the price bands for domestic airfares have once again come up. The airlines claim that excessive regulation is a barrier to the full recovery of domestic air traffic. In order to lessen their burden, Indian airlines are also expecting that ATF will be included in the scope of the goods and services tax regime.

Airlines are free to establish ticket prices after 15 days from the date of booking because fare caps are currently applied on a rolling basis for a 15-day cycle.

Given that ATF accounts for 30-35 percent of operational costs, experts said it has become challenging for airlines to sustain operating efficiencies under the present ticket limitations.

After a two-month lockdown due to the pandemic, services resumed on May 25, 2020, with lower and upper limits on domestic airfares dependent on flight time.

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 in order to prevent passengers from being overcharged during periods of strong demand for seats.