Airfare caps on domestic routes helped tourism industry limp back to normal in January

The recent domestic airfare cap brought in by the aviation regulator in the wake of the IndiGo crisis helped the tourism industry to bounce back significantly, with the airfares remaining between ₹8,000 and ₹10,000 even on the longest domestic routes during peak tourist season, despite aviation fuel price hikes.

In a representation to Union Ministers of Civil Aviation and Tourism—K.Rammohan Naidu, Gajendra Singh Shekhawat, Murlidhar Mohol, and Suresh Gopi—the IATA Agents Association of India (IAAI) urged a permanent institutionalisation of domestic airfare caps to promote tourism and strengthen regional air connectivity.

According to tourism industry insiders, the aviation crisis in December with the disruption of IndiGo’s flights across the country had upset the prospects of the tourism industry in Kerala, which was then getting ready for the Christmas and New Year season, with massive cancellations. However, the price cap brought in by the Ministry of Civil Aviation which regulated economy class air fares for domestic flights starting with a cap of ₹7,500 for a flight distance of 500 km, ₹12,000 for up to 1,000 km, ₹15,000 for up to 1,500 km and ₹18,000 for longer flights, helped the industry in January to bounce back.

However, things are back to square one in February with airfares going back to the previous mode of demand-driven surge pricing, said James Kodianthara, former chairperson of the Kerala chapter of the Indian Association of Tour Operators (IATO).

For instance, an IndiGo flight to Delhi from Thiruvananthapuram on February 26 charges ₹20,013, while Air India’s fare is about ₹20,193 on the same route. The ticket fare on the Air India flight to Delhi from Kochi on February 26 is priced at ₹19,251, while IndiGo charges ₹18,156. The Ministry has invoked regulatory powers to ensure fair and reasonable fares across all affected routes. However, the airlines are now resorting to dynamic pricing, he said.

According to Biji Eapen, National President, IAAI, the measure brought in soon after the aviation crisis curbed exploitative surge pricing, protected passengers during emergencies, and stabilised the domestic aviation market. The Centre should be ready to continue the domestic airfare cap as a permanent and legally enforceable ceiling, with no seasonal, event-based, or demand-driven pricing permitted to breach the prescribed limit under any circumstances.

According to E.M. Najeeb, senior vice-president of the Indian Association of Tour Operators (IATO), steady airfares will encourage domestic travellers to fly inside the country for various purposes, including domestic tourism purposes. The unrealistic surge on domestic routes will prompt the tourists to look for other options, including overseas packages, which will deprive the local economy of the benefit it was to accrue from the sector, said Mr. Najeeb.