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Government Rules Out Capping of Airfares

According to a report in The ET, the government said airfares have dropped significantly on peak routes this week and ruled out capping fares, saying such a move will distort competition and hurt the benefit that competition provides. A civil aviation ministry official said the ministry’s intervention has resulted in a decrease in airfares by almost 60% over the last one week. Also, the Director general of Civil Aviation (DGCA) is not empowered with the economic regulation of civil aviation and air transport, the official said. Airfares skyrocketed in the country in the busy summer season with passenger demand outstripping supply, particularly after Go First stopped operations on May 3 and also due to a slowdown in aircraft deliveries to Indian carriers amid global supply chain constraints. Last week, at a meeting with top bosses of airlines, civil aviation minister Jyotiraditya Scindia asked them to “self-monitor” fares on routes that have seen considerable surge. Citing data collected by the aviation regulator’s tariff cell, the official cited above said that as compared to June 5, ticket prices on June 13 (Tuesday) for a flight one week later have decreased by 13% to 56% after the minister’s intervention.

Scindia had requested airlines to devise a mechanism for ensuring reasonable pricing within highRBDs (reservation booking designator). RBDs refer to slabs used by airlines to price air tickets where the lower fare is available for advance booking much earlier with prices rising as date of journey approaches closer. Defending the decision to not cap airfares, the official said domestic aviation was totally deregulated in March 1994 with the repeal of theAir Corporations Act. “The direct impact of deregulation is that a passenger in a lower income group has been able to travel by air due to competition among airlines,” the person said.
According to research by Hong Kong-based Airports Council International (ACI), India witnessed the highest increase in airfares among the 10 top aviation markets in theAsia-Pacific and West Asia collectively across both domestic and international flights between the fourth quarter of 2019 and the fourth quarter of 2022 in nominal terms, rising by over 43%.

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