Fare tweaks offer some cushion to airlines, but it may not suffice

The ministry of civil aviation (MoCA) has extended the restrictions on domestic airfares—floor and cap—by a little over a month to 31 March. Also, the proportion of tickets to be sold below the median fare of the band has been reduced from 40% to 20%.

This is expected to offer some relief to airlines, albeit not much. Varun Ginodia, analyst, Ambit Capital, said: “The extension of fare cap would offer a cushion to more vulnerable airlines, as it can delay a potential price war that can be kicked off by stronger players. Additionally, smaller proportion of seats sold below the median fare of the band offers some comfort on profitability. Overall, the move delays the anticipated consolidation in the aviation sector.”

Even so, the decision is not expected to be a game-changer for airlines. With more capacity being deployed and the March quarter being a leaner one, analysts don’t expect fares to be high in any case.