Maximum Economy Airfare Could be Fixed at Rs. 20,000

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Spicejet_generic_650NewZNew (New Delhi) : The government is considering imposing a temporary cap on airfares to limit sharp movements in prices in the wake of troubles at SpiceJet the country’s second-largest budget carrier.

A note circulated in the Civil Aviation Ministry proposes the introduction of  both upper and lower limits for prices.  The maximum one-way fare for an economy ticket should be Rs. 20,000, the note suggests. It also asks that airlines be barred from selling at lower than cost price in flash sales.  The suggestions will be considered by top bureaucrats in the ministry and then discussed with airlines. Sources said a decision could be announced within a month.

Fierce competition among airline firms has long limited price increases despite crippling operating costs. After SpiceJet was briefly forced  last week to ground its fleet after suppliers refused to refuel planes, other airlines raised prices, forcing more hardship on stranded passengers. The aviation industry in India has been plagued by high costs and heavy losses. Two years ago, Kingfisher Airlines imploded leaving thousands of crores in unpaid debt. Price wars and some of the highest operating costs in the world have left carriers bleeding cash, while new entrants like AirAsia add to competitive pressure.

As carriers struggled to translate rapidly growing demand for air travel into profit, SpiceJet aggressively expanded its fleet of Boeing planes and started flying more routes, using heavy discounts to win passengers. A collapse of SpiceJet would be deeply embarrassing and so the government has been helping  by asking airport operators and fuel suppliers to give the carrier more time to pay its bills. In an attempt to support airlines, the Civil Aviation Ministry is also considering extending plans to lower taxes and airport charges.