Stock India airport passengers
The Indian government has not done anything to help out struggling airlines after the COVID-19 crisis. For the authorities to raise minimum fares even as people are making a gradual return to flying could hurt airlines more. Image Credit: PTI

Dubai: Air fares within Indian cities are changing almost every other week as attempts by the Indian government to set a cap on rate increases add to the confusion.

A flight from New Delhi to Mumbai costs up to Dh300 right now – but these are likely to plunge to Dh120 by next month. A New Delhi to Kochi seat starts at Dh450 now, but could fall to Dh180 in September.

India’s aviation regulator has increased the minimum and maximum limits on fares. As per the update, the minimum and maximum fares for the shortest flights have been raised to Rs2,900 and Rs8,800 from Rs2,600 and Rs7,800, respectively. Fares on the longest sector have increased to Rs9,800 and Rs 27,200 from Rs 8,700 and Rs 24,200, respectively.

India also increased domestic passenger capacity to 72.5 per cent of pre-Covid levels from the 65 per cent earlier. The move comes at a time when daily domestic flights are increasing.

Beating the price cap
“If someone was to buy a ticket now, fares for 30 days from today would be mandated by the rate caps,” said Vinamra Longani, head of operations for Sarin & Co, an Indian law firm specializing in aircraft leasing and finance.

“Any seats booked beyond 30 days can be sold at vastly discounted prices, which is what is happening now.”

No help whatsoever

“Unlike in the West, where the airline industry got billions of dollars in bailouts to survive the Covid crisis, In India, the government never gave any cash handouts to the airline industry,” said Vinamra Longani, head of operations for Sarin & Co, an Indian law firm specializing in aircraft leasing and finance.

“To protect cash poor airlines, India’s Ministry of Civil Aviation put these capacity and fare caps in place. At this point in time, there's only one Indian airline, Indigo, which has significant cash reserves to survive the crisis.”

Indigo reported a net loss of Rs31.7 billion for the quarter ended June 2021, compared to a loss of Rs 11.5 billion for the quarter ending March 21.

“Revenue is improving - this quarter (June to August) is shaping up to be better in terms of revenue numbers,” said Rono Dutta, Indigo’s CEO during a conference call last month. “Our forward bookings are picking up - but they are not as strong as they were in February.”

Better yields

Even then, this should offset some of the losses airlines are carrying. According to Ashwini Phadnis, a Delhi-based aviation analyst, “It remains to be seen what impact this will have on discretionary flying as the Indian market is known to push back every time airfares are raised. The key question that needs to be asked is why the government is still involved when the aviation market has been deregulated.”