In the wake of the ongoing COVID-19 pandemic, the Ministry of Civil Aviation has introduced airfare bands with upper and lower limits. Under normal circumstances, the government will not establish airfare bands. Airlines are free to fix reasonable airfares under Aircraft Rules, 1937.
The current step of fixing an upper and lower limit for the fares would protect the interests of both airlines and the passengers, according to Jyotiraditya Scindia, Minister of Civil Aviation. “The airfare bands serve the dual purpose of protecting the interests of the travellers as well as of the airlines and have been revised from time to time. Fare capping is, presently, applicable on a rolling basis for a 15 days’ cycle.” Minister said. The current measure is adopted under Aircraft Act, 1934.
Impact of Aviation Turbine Fuel on Airfare
Airfare bands were revised by the airlines from time to time depending on the increase in the price of Aviation Turbine Fuel (ATF) to keep the aviation sector viable. ATF is at an all-time high, making the struggle of survival harder for airlines. A kilolitre (1,000 litres) for domestic flights now costs Rs 86,038.2 in Delhi and Rs 84,505.6 in Mumbai. This is the highest price range hit by ATF in India. The spending for ATF accounts for more than 40% of operating costs for the airlines.
Meanwhile, the central government is considering the issue of bringing ATF under the GST net, which will be taken up during the next session of the GST Council.
Pandemic induces heavy loss for airlines
During the last two years, COVID-19 adversely impacted the revenue streams of the airlines, among other sectors. Scindia added that the estimated losses incurred by airlines in India in 2020-21 were approximately Rs 19,564 crore. The Airports Authority of India (AAI) incurred a loss of Rs 2,767.01 crore during fiscal 2020-21.
“No separate assessment has been made for losses on account of suspension of international flights,” he said.
A speedy recovery for the aviation sector continues to be a challenge. Omicron has further extended the government’s plan to resume scheduled international flights. They are suspended until February 28, 2022, considering the rising cases across the country. The flights under the air bubble arrangement India made with over 32 countries continue their operations. Besides, the all-cargo international flights are currently operational.