Domestic flights fares to remain high. Here's why

Domestic ticket prices are set to remain high as all local airlines are in favour of the government continuing to set fare bands. The government has been fixing upper and lower limits on the basis of distance since airline operations resumed in May last year after a two-month stoppage as part of the nationwide Covid lockdown. This has led to an increase in fares by up to 35% from pre-pandemic levels. The government has also been regulating capacity since then, setting limits on how many passengers can be carried.“Airlines are also in favour of a fare cap and we will continue with the regulation of fares,” said one person aware of the development. The industry is, however, divided on the issue of restoration of domestic capacity to 100% of pre-Covid levels from the current 72.5%. Number of Passengers ET spoke to government officials and airline executives on the issue — none of them wanted to be named.While IndiGo and Vistara are said to be in favour of full restoration of capacity, Spicejet and GoAir are against it. AirAsia India and Air India aren’t pushing for changes but are said to be keen on relaxing the capacity restriction. The carriers couldn’t be immediately reached for comment."A call on the capacity limit being relaxed further may be taken during the middle of September. It may, however, not be relaxed to 100% but may go up to 80%," said another person cited above.The number of domestic passengers is about half that before the pandemic."We were doing about 420,000 passengers a day pre-Covid, which is down to about 210,000 per day," said one of the persons. "If the loads are about 50% of pre-Covid, allowing 72.5% of the capacity is the right thing to do."An airline executive said the numbers aren’t comparable."You cannot compare a fully opened market with a restricted one," he said. "A case in point is the (higher) passenger loads during the first week of August, which was because airlines could offer cheap fares as the issuance of the fare regulation order was delayed."Another executive said the scrapping of restrictions would lead to a jump in passenger numbers."We expect that a large number of the country’s 300 million middle-class flying population would be doubly vaccinated by October," he said. "This and a flat third wave of Covid would bring domestic aviation back to growth faster than expected if the restrictions are removed," another executive said.Analysts recommend the scrapping of curbs."Any restriction impacts growth and aviation is no different. Removal of restrictions would help revival of the domestic aviation sector," said a travel analyst.

from Economic Times https://ift.tt/3kXGnIr