Price war in the sky: Airfares tumble after government lifts fare caps

Airfares on major domestic routes have fallen after peaking recently.

Less than a week after the government removed fare caps, domestic airlines have slashed prices.

The prices have been slashed by Akasa Air. The Mumbai-Ahmedabad flight is available for just Rs 1,400.

The seats went for about Rs 3,948 and Rs 5,008 in the month of August.

IndiGo, the country's largest airline, has matched Akasa Air's rates on both routes, while GoFirst has slashed its fares on these routes.

Airfares between Delhi and Lucknow have dropped in the last few days. The lowest rates are offered by Air Asia and IndiGo. The cheapest seats used to be between Rs 3,500 and 4,000.

Go First, IndiGo and Air Asia offer the cheapest flights on the route.

The price on the Mumbai-Jaipur route has dropped in the last few days.

The competitive landscape in India is reflected in the new prices. It is a positive sign that all the airlines have reduced prices.

Lower prices are not only a reflection of airlines looking to grab or retain market share, but are also a result of competition, demand, supply, costs, and potential cargo revenues.

An aviation expert said that severe competition could either push the weakest player out of the market or delay their path to profitability.

Senior airline officials said that the fall in prices is due to lower demand in the off-season for travel in India.

Ahead of the upcoming festival period prices may rise slightly, but are likely to remain less expensive than when fare caps were in place.

A senior official at a domestic airline said that the return of corporate travel in the past few months is an encouraging sign.

Corporate travel has led to a rise in passenger load factors. This allows the industry to offer lower prices.

The Indian government implemented price bands on domestic airfares in May 2020 in order to control price increases. Fees will be phased out by the end of August 2022, according to the government.

The airline official said last week that they were looking forward to the new pricing mechanism for aviation turbine fuel.

Customers will benefit from lower ticket prices once the mechanism comes into effect, he said.

He further added that fares on metro routes were likely to fall significantly as ATF prices are likely to be lower when supplied in metro cities like Delhi and Mumbai, which will translate into lower prices on those routes.