In a blow to airlines, India has extended the 80% cap on domestic flights. This means airlines will not be allowed to operate more than 80% of their approved schedules until March 31st. The move comes as India is quickly reaching daily pre-pandemic traffic and passenger levels.
The government confirmed yesterday that it plans to extend the current 80% capacity cap on airlines. According to a DGCA order seen by Mint, the cap will remain in place until 31st March 2021, or the commencement of the summer schedule. The move might come as a surprise to many, with the government previously saying it expects a full recovery by early 2021.
The extended caps mean airlines might have to scale back new planned services or maintain lower frequencies than hoped. The last few months have seen airlines like IndiGo and SpiceJet grow their networks and add a series of new routes. However, the capacity caps mean further growth could be slowed.
It is notable that the order says the 80% will only continue to affect winter schedules and not the upcoming summer one. This could mean the government plans to lift the caps will the start of the summer, giving airlines a fresh timeline. However, any such decision will be taken in the future.
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Fare caps eased
While capacity caps might still be in place, airlines could be getting rid of fare caps very soon. Civil Aviation Minister Hardeep Singh Puri has told Parliament that the price controls will be eliminated as the domestic market is close to a full recovery. This will be a boost to airlines, who can now back to their older, demand-based, pricing algorithms.
Airlines have jumped at this promise and have rolled out huge discounts, selling tickets for as low as ₹877 ($12) each. This is restarted a low-expected price war among the airlines, one which the government tried to avoid early on. The timing of the sale coincides with the timing of the fare caps being eased on April 1st.
The removal of fare restrictions could also come with the exit of capacity caps, allowing the domestic market to function as normal. India has already recovered to 85% of its daily passenger count and nearly 80% of its capacity. The next few months could allow those numbers to reach nearly 100%.
Long way to go
While India’s domestic recovery might be chugging along just fine, airlines continue to struggle. The absence of most international flights and high-paying business travelers means revenues remain far below 2019 levels. Until a vaccine is readily available to the population, it’s unlikely we will see a full aviation recovery.
For now, airlines are looking to new sources of revenue, like regional routes, and bracing for another tough year. If all goes well, travel could pick up by the end of 2021 as countries vaccinate a majority of their populations.
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