Fare hike may hit air traffic recovery

The government’s move to hike minimum and maximum fare slabs by an average 12.5 per cent will help airlines narrow their losses but delay the recovery of air traffic to pre-covid levels, said aviation experts.

On Friday, the civil aviation ministry raised the floor and ceiling prices which airlines can charge in a thirty-day cycle. There is no cap on fares sold beyond 30 days and airlines are free to charge their own prices.

Airlines have also been allowed to deploy 72.5 per cent of their capacity — an increase of 7.5 per cent. With the latest order, minimum fare (excluding taxes) on the Mumbai-delhi route has increased from ~4,700 to ~5,300. Similarly, the minimum fare on short-distance routes such as Mumbai-goa or Delhichandigarh has risen from ~2,600 to ~2,900.

“The decision to increase fare floors and caps is shocking and insensitive to the airlines and more importantly to the passengers. (It) sends a signal that we are not interested in registering traffic volumes,” aviation consultancy CAPA tweeted on Friday.

Ameya Joshi, founder of aviation blog Network Thoughts, said: “The lower fare bands for short-duration flights are almost double than the fares in pre-covid times. This will have a negative impact on the flight occupancy. The government could look at removing fare bands for shorter sectors to begin with and judge the market response before deciding the next steps.”

Over 269,000 passengers flew on August 1, the highest since the resumption of air traffic in May 2020. In the first seven days of August domestic air traffic rose over 53 per cent over the same period in July as the government delayed reintroducing fare bands. The growth in traffic has slowed since.