The Indian aviation industry is again on the backfoot. The progress made towards reaching pre-COVID flight levels during the first couple of months of this year has all but been lost.
In another downgrade of services, the Ministry of Civil Aviation (MoCA) yesterday ordered that the flight capacity be capped back to fifty percent (50%) of the pre-COVID levels. In addition, MoCA permitted the airlines to increase the airfares by fifteen percent (15%). This order will come into effect on June 1, 2021, and remain in force till July 31, 2021.
You may recall the Indian government had gradually increased the flight capacity from a low of thirty-three percent (33%) in May 2020 to eighty percent (80%) in December last year.
Air Fare Regulations
Similarly, the Ministry has been regulating airfares since May 2020. The minimum and maximum chargeable fares have been capped based on flight duration. For instance, for a two-hour Delhi Mumbai flight, the government permits a minimum return fare of INR 7800. However, due to lack of demand, spot fares are being sold well below the minimum. According to Times of India, on Friday, the cheapest return fare for travel the next day trip on this sector was being sold at INR 5900. The permitted increase in the cap may not significantly increase airline revenues if the demand does not pick up in the coming weeks.
The annual domestic passenger traffic in India before the pandemic was about 144 million, an average of 12 million a month. During 2020, the passenger traffic fell to 63 million – a fifty-three (53%) percent drop. The first four months of 2021 saw passenger traffic of only 29 million.
In the first three months of the current year, the domestic passenger traffic was averaging about 7.8 million. In April, the traffic dropped to 5.7 million. Likely, the May figures may even be lower. The drop in traffic prompted the government to decrease the capacity.
The Minister of Civil aviation, Hardeep Singh Puri, remains hopeful that as more people get vaccinated, they will take to the skies again.
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