INDUSTRY

Cap on airlines’ capacity extended up to March 31, upper and lower air fare limits raised by 30%

The government has extended the limits on capacity and control on air fares till March 31. However, the government has increased the upper and lower caps on air fares by up to 30 per cent to help airlines improve their balance sheets.


Currently, airlines are allowed to deploy 80 per cent of their pre-COVID capacity. But except market leader IndiGo, no other airline has been able to deploy around 70 per cent capacity of what they operated during the winters of 2020. After a closure of almost two months due to the Coronavirus-induced lockdown, domestic flights had resumed their services on May 25, 2020.

For instance, for flights with duration of 90 to 120 minutes, the lower fare cap has been increased to Rs 3,900 from Rs 3,500, whereas the cap on maximum chargeable fare has been increased to Rs 13,000 from Rs 10,000.


Analysts tracking the aviation sector note that the biggest worry is the absence of business travellers, who buy costly tickets, making it possible for airlines to offer cheaper fares to vacationers.


“We believe that domestic passenger growth would be slower, going forward (than seen over the last seven months) – particularly from business travel and foreigners travelling on domestic routes. This is attributable to long-lasting changes in demand demographics from COVID,” Swarnendu Bhusan of Motital Oswal wrote in a recent note to clients.


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