Govt hikes domestic airline capacity to 85%, tweaks price caps formula

Domestic airlines will now be able to operate at 85 per cent of their pre-Covid capacity and set their own fares for tickets beyond fifteen days of the booking date.

On Saturday, the Ministry of Civil Aviation increased the cap on airline capacity from 72.5 per cent to 85 per cent. Also, it tweaked the price cap formula letting airlines set fares for travel beyond fifteen days. Till now price caps were applicable on tickets up to 30 days from the booking date.

The move will enable airlines to operate more flights and will push up passenger loads with the onset of festive season next month.

Domestic air traffic rose 34 per cent to 6.7 million in August on a sequential basis on the back of an increase in capacity to 72.5 per cent. Increased vaccination and relaxed Covid-19 testing norms have helped too. Industry-wide seat occupancy too rose to over 70 per cent last month.

The easing of capacity and pricing restrictions comes after several rounds of discussions between Civil Aviation Minister Jyotiraditya Scindia and CEOs of airlines. 

The move to cap capacity and fares severely divided the industry with Ronojoy Dutta, CEO of India's largest airline IndiGo calling to remove government interference over price and capacity saying this prevents airlines from taking commercial decisions.

Operators of India’s largest airports —Delhi, Mumbai, Bangalore — have urged the government to remove caps on capacity and price as this is impeding the return of passengers and hurting the financials of India’s top airports, most of which are privately owned.