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Centre to Remove Upper, Lower Cap on Domestic Airfares from August 31

Centre to Remove Upper, Lower Cap on Domestic Airfares from August 31

From August 31, a cap will be imposed on the domestic fares of Jet Airways and Air India. On the same date, seven other airlines operating under the regional license scheme would also be able to increase domestic fares by up to 15 percent from their lower levels. The government has introduced the move to rein in pricing excess which is leading to a rise in airline ticket costs across various segments. This is being done through the Ministry of Civil Aviation’s (MoCA) Regional Air Operators (RAO) Policy. The new policy aims at making regional flying more affordable for flyers who do not have access to international airports within their jurisdiction. It also aims at reducing direct competition among low-cost carriers and other niche players such as no-frills airlines and virtual carriers by providing them an opportunity to operate multiple low-cost services using common aircraft types, flight networks, and similar service standards. While most stakeholders welcomed this move, some contested it arguing that it would lead to price rises in certain regions where demand is low and supply is high.

Introduction of Regional Fare Cap

The new policy will introduce a regional fare cap for domestic flights for all domestic airlines operating under the Regional Air Operator’s Permit (R-AOP) or a Foreign Tourist Permit (FTP). This will ensure that the price of a ticket does not increase by more than 15 percent in a particular region at any point in time. Airline operators that currently operate under the R-AOP, or a foreign airline that holds an operating permit under the R-AOP will be able to increase their fares by up to 15 percent in any part of the country. Similarly, operators that fly under the International Air Services Agreement (IaaS) will be able to increase their fares by up to 15 percent in any part of the country.

Reinstatement of Fare Control for Airline Operators in Reputed Groups

The new policy will also reinstate a fare control mechanism for all airline operators in the country that operate under the R-AOP, or a foreign airline that holds an operating permit under the R-AOP. From August 31, all domestic airlines that fly under the R-AOP will be able to impose fare control by setting minimum fares for particular routes. Before this, these airlines were not able to do so as the government had removed the control two years ago. From the new policy, it is expected that all the carriers which were not able to impose fare control before will now be able to do so. The move is expected to enable these airlines to increase their fares on certain routes but limit their increase to a certain extent.

Increase In Minimum Fare for Domestic Flights by Fivefold

The new policy will also allow domestic carriers to increase the minimum fare for some sectors by up to five times. Domestic airlines had to follow a policy that required them to set minimum fares for all sectors, irrespective of demand. The new policy will allow them to increase the minimum fare for certain sectors like New Delhi, Kanpur, Lucknow, Varanasi, Bhavnagar, Coimbatore, Jodhpur, Jaipur, and Agartala. The increase in minimum fare for these routes will be between 10 and 90 percent. Similarly, airlines will also be allowed to increase the minimum fare for sectors like Delhi, Mumbai, Bengaluru, and Goa. The increase in minimum fares for these routes will be between 10 and 90 percent.

Differentiation between Long-Distance and Rapid Transit Flights

Differentiation between long-distance and rapid transit flights is expected to be introduced in the new policy. Currently, airlines are allowed to increase the base fare by 15 percent for long-distance flights across the country. The new policy will allow these airlines to increase the base fare by up to 100 percent for long-distance flights across the country. However, the new policy will differentiate between long-distance and rapid transit flights. For long-distance flights, the airlines will be allowed to increase their base fares by 15 percent and for rapid transit flights (aerobridges and helipads), the airlines will be allowed to increase their base fares by up to 100 percent.

Removal of Upper and Lower Limits on Night Flights

The new policy will also provide an opportunity for low-cost carriers to operate night flights across India. Low-cost carriers were not allowed to operate night flights in India as they were not part of the scheduled air services. The new policy will allow them to operate night flights across the country as long as they have the requisite safety certifications. Low-cost carriers will be required to have flight safety management systems in place and meet certain other requirements before they are allowed to operate night flights.

Conclusion

The new policy aims to make flying cheaper and more affordable by reinstating a fare control mechanism for all domestic airlines operating under the Regional Air Operator Permit, or a foreign airline that holds an Operating Permit under the Regional Air Operator Permit. The policy will also allow airlines to increase their minimum fares by up to five times and differentiate between long-distance and rapid transit flights. Based on these changes, it is expected that fares of domestic airlines will decrease by between 5 and 15 percent. Apart from this, the new policy will also allow all international airlines to operate multiple low-cost services using common aircraft types, flight networks, and similar service standards.

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