Revised fare caps may lower ticket prices, boost sales
The Centre’s decision to tweak the price cap formula, letting airlines set fares for travel beyond 15 days instead of 30, is likely to bring down fares from the current levels during the festive season, industry experts said.
Since the second Covid wave was contained, most people travelled within a fortnight of bookings due to varying Covidrelated restrictions imposed by states, an airline official said, adding that travel beyond 15 days of the booking period has picked up since July.
“For the sector to revive to pre-Covid levels, people who are travelling by trains will have to be lured into taking flights again,” the official said, seeking anonymity. Besides, corporate travel, which accounted for a significant share of airline’s passenger traffic in pre-Covid times, is also witnessing a slow recovery, he said.
The Centre’s move will allow airlines to roll out special fares and promotional offers for the festive season, and smaller players will be able to shore up their cash flows.
It will help airlines to better stimulate the market, said independent aviation analyst Ameya Joshi, the founder of the website NetworkThoughts. “But, if traffic picks up and there is considerable travel during the holiday season, passengers could have to shell out more (as airlines could hike fares in the absence of fare bands beyond 15 days’ booking period),” he added.
Airline officials have also been lobbying with the government to relax the curbs on capacity, which were put in place due to the pandemic.
Consequently, the Centre recently allowed domestic carriers to operate at 85% of their pre-Covid capacity, up from 72.5%. Airlines hope to operate at 100% of pre-Covid capacity by the end of 2021, and expect air travel demand to make a strong recovery after the festive season with the pace of vaccination picking up in India.
However, considering that passenger count in early September was only about 60% of pre-covid level with the flight count at about 67%, according to data from NetworkThoughts, airlines will have to simulate the market to reach pre Covid levels by the year-end.
“Airlines have been financially bruised during the pandemic, so there is unlikely to be a fare war. So, demand is likely to drive prices in most cases,” said Mark Martin, chief executive of aviation consultancy Martin Consulting LLC.