A day after the civil aviation ministry stated it will remove the cap on flight ticket costs which was imposed 2 years ago due to the coronavirus pandemic, shares of Indian domestic airlines, Spicejet and IndiGo rose today.
InterGlobe Aviation Ltd
Shares of IndiGo’s parent InterGlobe Aviation Ltd rose as much as 2.3% to ₹2084.6 while smaller SpiceJet Ltd jumped as much as 7% to ₹47.9.
The government had set a minimum and maximum band based on the flight’s duration to prevent ticket prices from spiking once restrictions on air travel eased.
The cap on fares will be removed from August 31, 2022.
“We believe this to be a positive move from the government. This arrives at a time when fuel costs are stabilizing (ATF price down 13% from last month) and demands inching back to pre-COVID levels. We believe that the low-cost carriers will resume maintaining attractive fares in lean travel times.
However, with the festive season arriving up, higher fares could aid margins as fuel prices remain much above the pre-pandemic levels,” told Mansi Lall- Research Associate, Prabhudas Lilladher Pvt Ltd.
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“After review of the current status of Scheduled Domestic Operations viz-a-viz passenger demand for air travel, it has been decided to remove the fare bands informed from time to time regarding the airfares with effect from 31.08.2022,” the ministry tweeted on Wednesday while attaching an order copy.
The decision will bring relief to airlines including IndiGo, SpiceJet Ltd, Air India, Vistara, Jet Airways, and Akasa Air.
Domestic aviation operations have been seeing a rise with all COVID protocols in place, and the upcoming festival season is expected to boost demand for air travel.
ATF prices have been arriving down during the last few weeks after jumping to record levels, primarily due to the Russia-Ukraine war that began on February 24.
On August 1, the cost of ATF in Delhi was ₹1.21 lakh per kilo-liter, which was approximately 14 percent lower than last month.
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