Covid-19 pandemic: government reduces airline capacity to 50% from June 1
The government has reduced the capacity Airlines companies operate from 80% to 50% from June 1 in order to preserve the viability of Airlines companies with weak finances. Simultaneously, he raised the cap on air fares to rise by about 14 percent due to rising fuel prices. “Given the sudden development in the number of Covid-19 cases, the decrease in the number of passengers and the reduction in the occupancy rate, the current capacity cap of 80% is reduced to 50%”, a declared the Ministry of Civil Aviation in an order. . The directive comes at a time when Airlines companies SUO motorcycle have reduced capacity and some even fly at less than 50% of their capacity. Industry sources said direct government intervention on fares and capacity has severely divided airlines with SpiceJet, with Go Air supporting the move while leading the market. Indigo and owned by Tata Sons Vistara to oppose it. Airlines like SpiceJet and Go Air’s finances are at a precarious stage with both airlines on a slim cash balance. Go Air of the Wadia group plans to raise around 3,600 crore rupees to repay debts and suppliers. Aircraft lessors have sent notices to Go Air and Spicejet for failure to pay rent. Sources said that during a meeting between Secretary Pradeep Singh Kharola and airline executives, Spicejet and Go Air said with empty flights and rising fuel costs, it has become impossible to maintain the sustainability of operations and the government would have to reduce capacity. “With airlines operating only a fraction of their planes in the short term, it is possible that stronger airlines outnumber weaker airlines and skew prices to refuel their planes, affecting potentially the financial viability of carriers as well as that of the industry, ”said an official. This situation must be avoided, ”said an executive who attended the meeting. However, a framework of Indigo said that such government intervention on airlines’ commercial freedom hampers decision-making and increases the risk of undermining the ethics of a free market. India deregulated the aviation sector in 1994, allowing market forces to determine tariffs. However, a clause in the Aircraft Act of 1934, which governs aviation in India, allows the government to set all the rules, including those related to the regulation of tariffs. However, last year, when airlines were allowed to resume operations after a two-month shutdown, the government began to control capacity and air fares. “Airlines, including Indigo have already reduced their capacity to less than 50 percent. Some have reduced further according to their own commercial wisdom.
But intervention by the ministry on things like tariffs and capacity is unwarranted and sends the wrong signal, ”he said.