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Airlines with some room for maneuver in local fares | India News


NEW DELHI: The Ministry of Aviation issued an order on Friday saying domestic airfares will remain capped until March 31, 2021, an additional extension of more than a month from the previous deadline of February 24. However, airlines will now need to sell only 20% of seats with fares below the midpoint of the minimum and maximum fares.
They were asked to sell 40% of the seats on a flight below the midpoint when scheduled flights were allowed to resume on May 25, 2020, with limited fares.
This means that fewer seats will now be available for lower price bands, as airlines can now sell more domestic flight tickets for higher fares.
Airlines had been signaling that jet fuel prices have skyrocketed significantly since the rules were established last May and that the rate range should be increased to account for rising operating costs or eliminated.
On June 1, 2020, a kiloliter (1,000 liters) of jet fuel cost Rs 26,860 and Rs 26,456 in Delhi (in Q3) and Mumbai, respectively. On January 1, 2021, prices shot up to Rs 39,324 and Rs 37,813 (additional taxes) in Delhi and Mumbai, respectively. Jet fuel accounts for almost 40% of an airline’s total operating cost.
Last May, the Ministry of Aviation classified domestic flights into seven categories based on flight time, starting with flights of less than 40 minutes with a range of Rs 2,000-Rs 6,000 and going up to those with a flight time of 3- 3.5 hours with a range of Rs. 6,500-Rs 18,600.
Delhi-Mumbai, one of the busiest domestic air routes in the world, belongs to a category with a fare range of 3,500 to 10,000 rupees. As of Friday, airlines were supposed to sell 40% of seats on this route below the midpoint of Rs 6,750, and now they will have to sell half that number of seats at that rate. The formula for calculating the midpoint is the minimum rate plus the maximum rate divided by two.

Times of India