New Delhi: In a major policy shift, the civil aviation ministry is examining a proposal to cap the maximum and minimum one-way economy class airfares in the country. While the maximum price could disallow airlines from charging more than Rs 20,000 on any route, an attempt to prevent airlines from offer air tickets at prices which are below operating cost of an airline could end the days of cheap air travel.
While “maximum price regulation” is expected to prevent over-charging of passengers through high spot fares, the regulation on minimum price will forestall the repeat of Kingfisher and SpiceJet crisis. The move is being seen as a direct fallout of the SpiceJet crisis. The government is expected to take a decision after discussing the matter with all domestic airlines.
So far, the government had maintained that air-fares are not regulated by it and that these are decided by the airlines as part of their commercial strategy. “As a direct fallout of the SpiceJet crisis, there could now be a major policy shift by the government on air-fare regulation,” ministry sources said.
The ministry is also expected to push for financial incentives for airlines such as their declaration as an infrastructure industry to enable access to funds at lower interest rates, permission for external commercial borrowings at low rates in global markets, tax benefits including income tax exemption, and maximum interest cap by Indian banks for loans to airline companies.
The ministry is taking this up with the finance ministry in view of the coming Budget in the next two months. The entire gamut of issues including proposed financial incentives and air-fare regulation are being closely monitored by civil aviation minister Ashok Gajapathi Raju, sources said. The ministry, sources said, may fix minimum fares after adding an appropriate profit margin to the break-even price per km.
