Airfare rule tweaks offer some cushion to Indian airlines but may not help much

By Livemint

The Ministry of Civil Aviation (MoCA) has extended the restrictions on domestic airfares–floor and cap–by slightly more than a month to 31 March. Also, the proportion of tickets to be sold below the median fare of the band has been reduced to 20% from 40%.

This provides some relief for airlines, grappling with demand slowdown in a post pandemic world. Plus, it is also helpful considering the March quarter is a relatively lean season.

Varun Ginodia, analyst, Ambit Capital said, “The extension of fare cap would offer a cushion to more vulnerable airlines, as it can delay a potential price war that can be kicked off by stronger players. Additionally, smaller proportion of seats sold below the median fare of the band offers some comfort on profitability. Overall, the move delays the anticipated consolidation in the aviation sector.”

Even so, the move is hardly a game changer for the fortunes of the sector. With more capacity being deployed and this being a leaner quarter, analysts don’t expect fares to be strong in any case.

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