Tweaked farecapsto drive ticket sales
The Centre’s move will allow airlines to roll out special fares for the festive season
NEW DELHI: The government’s decision to tweak the price cap formula letting airlines set fares for travel beyond 15 days, instead of 30 days, is likely to bring down air fares from the current levels during the festive season, industry experts said.
Since the second Covid-19 wave was contained most people travelled within a fortnight of bookings due to the varyingCovid-related 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 added, 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 added.
The Centre’s move will allow airlines to roll out special air fares and promotional offers for the festive season to woo passengers, and smaller airlines 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 holiday season, passengers could have to shell out more (as airlines could also hike airfares 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 restrictions on capacity, which were put in place due to the pandemic.
Consequently, the Centre recently allowed domestic carriers to operate at 85% of their preCovid 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 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 between them. So, demand is likely to drive prices in most cases,” said Mark Martin, chief executive of aviation consultancy Martin Consulting LLC.
As things stand, around 6.7 million passengers took to the skies in August, compared to 5.01 million in July, show the latest data from the Directorate General of Civil Aviation (DGCA). In comparison, 7.83 million domestic passengers flew in March, just before the second wave hit the country. “A recovery in air passenger traffic will, however, depend on our ability to control the third wave (if any),” said Martin.
On Saturday, the ministry of civil aviation increased the cap on airline capacity from 72.5% to 85% Also, it tweaked the price cap formula letting airlines set fares for travel beyond fifteen days. Till now price caps were applicable on tickets up to 30 days from the booking date.
The move will enable airlines to operate more flights and will push up passenger loads with the onset of festive season next month.
Domestic air traffic rose 34 per cent to 6.7 million in August on a sequential basis on the back of an increase in capacity to 72.5 per cent. Increased vaccination and relaxed Covid-19 testing norms have helped too.