An Airbus A350 passenger aircraft, operated by ITA Airways, sits on the tarmac at Fiumicino airport in Rome, Italy. Image Credit: Bloomberg

Rome: Italy is backtracking on a controversial price cap on airfares that sparked an angry reaction across the aviation industry, as the government led by Prime Minister Giorgia Meloni hands oversight powers to the country’s competition regulator.

Rome is readying changes to its recent decree on pricing, put in place during the summer in reaction to soaring fares on domestic routes to Sardinia and Sicily, the country’s two biggest islands, according to a draft of the amendment seen by Bloomberg.

The backdown follows weeks of withering criticism by airlines and a round of talks between carriers and Industry Minister Adolfo Urso, and points to a recurrent strategy by the government to soften measures following their announcement or approval.

Italy’s competition authority will be given oversight responsibilities for pricing in the industry, with a focus on flights to the islands and on price spikes in the wake of natural disasters that block transportation via road or rail, according to the draft.

That stipulation is linked to the price spikes seen on routes to Emilia Romagna earlier this year after heavy flooding in the central Italian region. The regulator will hire additional staff to cover its new responsibilities, according to the draft, which was previously reported by daily Il Messaggero.

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Ryanair Holdings CEO Michael O’Leary told Bloomberg last week the price cap was “illegal” and impossible to comprehend. The carrier has filed a complaint on the measure with the European Union.

Dublin-based Ryanair and flag carrier Alitalia’s successor ITA Airways are the dominant players on services to Sicily and Sardinia from Italy’s largest cities, Rome and Milan.

The fare situation in Italy mirrors price hikes that have galvanized other European governments to push back against carriers, including measures aimed at rising fees for baggage and seat selection.

The UK’s Department for Business and Trade is investigating what it calls hidden fees after Prime Minister Rishi Sunak lashed out at the charges in June, an agency spokesperson said. Spain’s Ministry of Consumption has begun examining fees at low-cost carriers such as Ryanair, Vueling Airlines SA, EasyJet Plc and Volotea SL.