Vistara will be happy if the lower and upper limits on airfares are increased but the best solution would be for the airlines to have absolute freedom to price, its CEO Vinod Kannan said on Sunday.
On June 16, the Aviation Turbine Fuel (ATF) prices in India were hiked by the steepest-ever 16 percent to catapult rates to an all-time high in step with hardening international oil rates.
IndiGo CEO Ronojoy Dutta on June 1 said that the Civil Aviation Ministry should consider increasing the upper limits on domestic airfares as the rising ATF prices have become a real problem. SpiceJet CMD Ajay Singh on June 16 said on that the sharp increase in ATF prices and the depreciation of the rupee have left the domestic airlines with no choice but to immediately raise airfares.
The Civil Aviation Ministry had imposed lower and upper limits on domestic airfares based on flight duration when services were resumed on May 25, 2020, after a two-month lockdown due to the COVID-19 pandemic. For example, airlines currently cannot charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) on flights with duration of less than 40 minutes.
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The lower caps are there to protect the financially weaker airlines and the upper caps are to protect the passengers from high fares. The price of ATF on June 16 was increased by Rs 19,757.13 per kilolitre, or 16.26 percent, to Rs 1,41,232.87 per kl (Rs 141.2 per litre) in Delhi, according to a price notification of state-owned fuel retailers.
When asked on Sunday if he believes that upper caps on airfares should be increased amid rising ATF prices and weakening rupee, Kannan said, "Our position, as well as Vistara is concerned, we have always said the best solution or the best open market is where there is absolute freedom to price. That is the ideal situation." However, Vistara knows why the fare caps are there, he said. Kannan was speaking to reporters on the sidelines of the 78th annual general meeting of International Air Transport Association (IATA) in Doha.
"They (fare caps) are there for certain reasons. I believe that they are needed to protect the airlines but also the customers (passengers)," Kannan noted. He said Vistara's airfares are hitting the upper caps occasionally.
"We are nowhere (in a situation) where we are hitting the (upper) cap 80-90 percent of the time because as you know demand is also the function of the day of the operation. It is also fiction of other factors as well," he added.
He said, "Yes, I will be happy if the fare cap is increased right through, not just the ceiling but also the floor. At the end of the day, our position remains that market pricing is the most optimal." .
