Airfare cap removal lowers ticket prices, increased air traffic reported, experts claim

Amid the coronavirus pandemic, the airfare cap was introduced, which has been finally removed and has resulted in lower airfare and increased passenger traffic.

After being in effect for over two years during the coronavirus pandemic, the airfare cap has been recently removed, and it has brought down the prices of the tickets by a fair margin for routes that have relatively lesser passenger loads. Resultantly, a mixed trend for the fares has been observed, claim experts. The decision to remove the airfare cap came after a gradual recovery in domestic air passenger traffic was observed. Although the average ticket price has not seen any drastic change, a mixed trend has been observed with a rise in fares for certain routes and a drop in some sectors.

The country's largest airline IndiGo said the removal of airfare caps will give an opportunity to offer dynamic pricing and that there has been a consistent increase in the number of passengers over the last 5-6 months.

The airline did not provide a specific answer on the airfare trends cap removal.

Indiver Rastogi, President & Group Head, Global Business Travel, Thomas Cook (India) and SOTC Travel, said the removal of airfare caps enables carriers to offer the benefit of lower pricing to customers on sectors/routes where flight loads are comparatively lower than others.

"And this is already being seen for sectors like Amritsar, Lucknow, Dehradun, Surat, Nagpur and Pune where a drop of 8-10 per cent is visible on fares compared to pre-cap removal.

"Airfares for September 1-15, 2022, to high-load/popular destinations from various hubs like Mumbai, Pune, Delhi, Bengaluru are understandably higher compared to pre-cap removal; an increase of 20-25 per cent for Andaman, 15-20 per cent for Goa, 5 per cent for Kerala and Himachal, 10-15 per cent for Kashmir," Rastogi said.

Karthick Prabu, Head of Strategy at Cleartrip said it is too early to arrive at a trend due to removal of airfare caps.

A comparison of the first 15 days of August and September indicates that September has seen 23 per cent higher bookings than August, he noted.

"Number of segments that customers booked also has increased by 21 per cent. Interestingly, the average booking price has not changed much. But, there are sectors where prices have dropped and there are expensive fares too. Some softening in airfares for pre-Oct travel has been observed. The fares for the festive period, esp Dussehra, Diwali, etc are continuing at elevated levels," he said.