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In a rare move, the Central government has decided to do away with airfare caps imposed on domestic airlines in 2020 during the coronavirus pandemic. The airfare caps would be removed from 31 August, the civil aviation ministry said on Wednesday, lifting restrictions on ticket prices.

The aviation minister, Jyotiraditya Scindia, said that the decision to remove airfare caps has been taken after careful analysis of daily demand and the air turbine fuel (ATF) price. ATF prices, which had increased to record levels due to the Russia-Ukraine war since February 2022, have been coming down for the past few weeks.

“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 notified from time to time regarding the airfares with effect from August 31, 2022," the aviation ministry stated in the order.

Jyotiraditya Scindia said on Twitter, “The decision to remove air fare caps has been taken after careful analysis of daily demand and prices of air turbine fuel (ATF). Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future."

In 2020, the government regulated fares by imposing a minimum and maximum band based on the flight's duration to prevent ticket prices from spiking due to pent-up demand arising from an easing of restrictions on air travel.

The decision to remove airfare caps from the airlines will bring relief to airlines including IndiGo, SpiceJet Ltd, Air India, and Vistara - a joint venture between the Tata Group and Singapore Airlines - as well as new entrant Akasa Air. The decision will allow the airlines to price tickets freely.

India is seeing a strong rebound in domestic air travel, with passenger numbers touching pre-Covid levels, boosting airlines' revenues. However, high fuel prices are eating away at their profitability.

The fare caps were imposed by the government when it lifted restrictions on air travel in May 2020, two months after it grounded all planes to curb the spread of the coronavirus.

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