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With airfare caps gone, skies to witness stiff competition

According to a report in The FE, with the removal of airfare caps coming into effect from Wednesday, consumers can expect forward bookings at discounted rates as competition is set to increase — especially in the competitive routes — with new airlines entering the market. However, the fares may continue to remain high on the monopoly routes.

While the carriers will be free once again to set fares according to the demands of the market and compete, travel agents are expecting a jump in bookings with ticket prices coming down in the coming months, especially during the upcoming festival season.

IndiGo, the country’s largest carrier, said the removal of airfare caps will help airlines to increase their passenger load factors by offering discounted fares.

Vistara, the country’s second-largest airline, said it will continue to have a balanced pricing strategy. A company spokesperson said that in a free market scenario, airfares are an outcome of a multitude of factors such as the dynamics of demand and supply, the operational environment, seasonality, cost, competition, market sentiment and taxation.

Jyoti Mayal, Travel Agents Association of India (TAAI) president, said, “India is a huge market and with the continuous development of aviation infrastructure, existing airlines expanding their fleets, and newer/older ones coming into the business, we hope to see a rise in the competition eventually leading to getting the end user benefited.”

The civil aviation ministry had imposed caps on domestic airfares based on flight durations when services were resumed on May 25, 2020 after a two-month lockdown due to the Covid-19 pandemic. On August 10, the ministry announced that airfare caps will be removed from August 31.

“The decision to remove airfare caps has been taken after careful analysis of daily demand and prices of air turbine fuel (ATF). Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future,” Civil aviation minister Jyotiraditya Scindia had said at the time.

Under fare caps, airlines could not charge a passenger, for example less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) for domestic flights of less than 40 minutes.

On an overall basis, the maximum fare could not go up to Rs 18,600. The lower caps were to protect the financially weaker airlines and the upper caps to protect passengers from high fares.

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