The government had on June 1, 2021, hiked domestic airfares by 15% while slashing flights within the country from 80% of pre-Covid level to 50% at the height of the deadly second wave. During the pandemic, the aviation ministry has been regulating both domestic fares and capacity. With that the second wave ebbing, the domestic capacity was first increased to 65% on July 5. Now capacity domestic deployment and airfares have been hiked by 7.5% and 12.5%, respectively.
As a result, for instance, Delhi-Mumbai one-way minimum fare will rise from Rs 4,700 to Rs 5287.5 and the maximum fare will rise from Rs 13,000 to Rs 14,625 (taxes extra). This is the fourth hike in airfares this year due to spiralling jet fuel prices, the biggest cost item for airlines — with a majority of Indian carriers struggling to survive in the absence of any fiscal support from the government during the pandemic. The range is for economy one-way fares and does not include user development fee of airports, passenger security fees (Rs 150 for domestic) and GST.
When schedule domestic flights resumed after a two-month break on May 25, 2020, the government had asked airlines to start with one-third of pre-Covid time flights and also fixed fare bands to ensure two things — passengers are not fleeced and financially strong airlines do not resort to predatory (below cost) fares to hasten the bankruptcy of weaker ones. Based on flying time, there are seven categories: starting at flights below 40 minutes and going upto 3-3.5 hours.
Several airlines and airport operators are asking the government to free up the sector from its pandemic-time control and let market forces decide capacity and fares to help revive the sector. The entire travel industry, including airlines and hotels, realise that their survival rests on domestic travellers as international travel could take a long time to open up both ways — Indian tourists being allowed in most countries and foreign tourists being allowed into India. This fact is recognised by government agencies too.
For instance, the Airports Economic Regulatory Authority’s consultation paper on Hyderabad Airport (HIAL) tariff says: “The authority has looked into the traffic trends at HIAL and observes that the traffic at Hyderabad Airport is dominated by domestic segment (about 81% of the total traffic over the last five years was domestic passengers). The authority is of the opinion that post-pandemic recovery of traffic at the Hyderabad Airport would be led by domestic segment and that it may recover at a faster growth rate than other major airports which tend to have a higher share of international traffic.”