India’s airlines have another problem to deal with – cap on domestic ticket rates

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COVID-19 surge, a cap on number of flights… and on ticket rates. India’s airlines have lots to contend with on their domestic routes.
Image Credit: PTI

Dubai: Apart from COVID-19 cases surging, India’s airlines have another problem to contend with – the cap on ticket rates.

The country’s aviation regulator has extended the capping of fares on all domestic flights until May 31 and limited capacity at 80 per cent of pre-pandemic levels. With the current regulations in place, airlines cannot charge beyond 10,500 rupees at the top end or less than 3,500 rupees at the lower.

This has been done to protect the customer as well as the airline. “The moment the government lifts the cap on fares, there are airlines who may charge 30,000-50,000 rupees for a one-way ticket,” said an industry source.

“Everybody was hoping that there would be an opening up of the market – and we were almost there.”

Cap on flights too

The government has also limited the number of flights that airlines can operate within the country. “The perennial challenge ever since the pandemic happened is that the Indian government has always looked at how to regulate the supply side,” said an industry source. “But neither the government nor aviation industry bodies have looked at the demand side.

“Everybody’s been working in silos… and that’s because everybody’s busy addressing the procedures regulated by the government.”

Finally, a bailout?

India’s aviation sector – including travel agents – is pushing for more government aid through the Confederation of Indian Industry (CII) and Associated Chambers of Commerce of India, among other industry forums.

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“All of them have given their inputs and the government is aware of it,” said the source. “The government will have to look into it whenever they have the resources to do so.”

Cut down in full flight

India’s airlines were doing somewhat better compared to their global peers just a month ago. New routes were being announced every week, while executives at Indigo, SpiceJet and Vistara charted out plans for global expansion with the safety net of an ‘air bubble’ agreements in place.

The second-wave of COVID-19, which infected more than 400,000 Indians on Saturday, has led to international suspension of flights from the South Asian country. The imposition of lockdowns and restrictions at the state level have brought domestic travel to a standstill – which up until now was a reliable source of revenue for the carriers.

“Given the dire situation with COVID-19 in India right now, it’s likely that the ban on flights from the UAE will almost certainly be extended to beyond Eid and May 14,” said Saj Ahmad, chief analyst, StrategicAero Research.

“There’ll be a significant battering of revenues for Indian airlines, who are already desperate and reeling from the fallout of the pandemic as it is. While UAE airlines will also suffer to a degree, they have the ability to deploy capacity elsewhere – airlines like SpiceJet, IndiGo, Air India and GoAir have very limited options.”

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