For years, airfares in the days leading up to Diwali have risen sharply. Air travel in India typically sees a big spike in the run-up to Diwali and fares consequently rise in tandem. Diwali has also long been the rare occasion when the booking and pricing curves in India move hand in hand.
However, 2020 is different in many ways. Irrespective of the booking curve, there is a limit to how much the airfares can increase, stifling the ability of airlines to make money.
That is because air travel in India has been regulated since the restart of flights after the outbreak of the pandemic. Now there exists a lower and upper cap on airfares across routes. Fare caps are in place until November 24. Airlines have a mandate to sell 40 percent of the seats at median fares.
The cap is not just on fares but also capacity, with airlines allowed only 60 percent of their fleet/flights to be deployed. Remember, the capacity limit was relaxed — initially, when the rules were formed, airlines were asked to operate at 33 percent capacity so as to maintain social distancing at airports.
The problem is this capacity restrictions do not apply to airports, leading to a few of them operating at near normal levels in August.