A short extension of the specified minimum and maximum airfare that carriers can charge may be needed beyond 24 August when the fare band India introduced in May expires, civil aviation minister Hardeep Puri said.
The price range for different sectors was introduced for three months when India resumed domestic air traffic in a limited way on 25 May so that there is stability in pricing. The idea was to protect passengers from any sudden surge in airfare while offering some revenue stability to airlines who operate at very thin margins in a competitive industry.
Puri qualified his statement saying it was just his view and a decision on the matter needs to be taken. The minister said the fare band, in his assessment, was reasonable for both the passengers and the economic viability of airlines. The minister explained that if the fare band had not been specified, there was a possibility of fares either crashing due to low demand causing economic distress to the industry or fares going through the roof on account of a surge in demand as the skies were opened up after two month-closure.
A decision on the matter will hinge on whether the same market uncertainties that warranted the price band will be relevant when the three-month period expires, the minister said.
“If between now and the next 15-20 days, domestic traffic goes up from 30% to 50%, and suddenly we have 1.5-2 lakh passengers a day, you may not need the fare band. But the rate at which it is going now, with demand still less than 33%, I think you may need a short extension of the price band, Puri told reporters at a briefing.
Civil aviation secretary Pradeep Kharola said the fare band was a harmonisation of the interests of the passenger and the airline and that a decision needs to be taken.
Analysts do not see normalcy returning to aviation industry any time soon. Rating agency Crisil Ltd. said in an analysis shared on Wednesday that the demand destruction in the sector can be gauged from the fact that, “passenger load factor was hovering at 50-60%, with primarily unidirectional flow of traffic, limited largely to essential travel and those returning to their home cities/ countries.” India allowed only a third of its summer schedule to operate when air travel was opened up in May.
The curtailed mobility of people due to the Covid-19 pandemic and related restrictions will shrink India’s air passenger traffic in both domestic and international sectors by 40-45% and 60-65%, respectively, this fiscal, Crisil said.