Ahead of relaunching Jet Airways operations, its newly appointed Chief Executive Officer, Sanjiv Kapoor, said the existing cap on airfares is not required. According to Kapoor, while the floor on fares has helped airlines shore up revenues, the ceiling on tariffs should be left to the industry.

“India has the lowest fares in the world and the highest costs. The cost of maintaining an aircraft is also very high in India,” Kapoor said in an interview to BusinessLine .

Following the disruption in travel, the government had fixed a floor and a cap for airline tariff to maintain a level playing field for airlines as well as make travel affordable for passengers. The floor price has ensured that there is no more deep discounting in airline tariffs.

“The fare floor is helping because there was an unnecessary destruction of that value but a cap on fares is not required because airlines take care of it themselves. It is always better to reach a higher revenue level with a higher fare rather than a higher load factor because revenue is a product of the fare and the load factor,” Kapoor said.

Tremendous potential

Kapoor is also bullish about the progress of the Indian aviation sector in the long term. “Short term, no country is in its best shape, but in the long term, the growth potential is tremendous for India because it is a very under-penetrated market compared to China. In order to tap the potential, airlines and airports need to grow,” he said.

While there are multiple things that are picking pace and working in favour of the sector, including Udan, digitisation and airfare floor, to unlock the complete potential, he said the India’s airport infrastructure needs to be ramped up at a faster pace, and the Udan scheme needs a few tweaks, and the airfare cap needs to go.

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