Govt revokes fare price caps imposed on airlines as Iran war disrupts operations

India is set to revoke airfare caps imposed ⁠in December on ⁠domestic air tickets effective March 23, according to an order by the Union Ministry of Civil Aviation, as airlines grapple with rising costs and disruptions amidst a raging war in West Asia.

The move comes after Indian carriers warned the government of mounting financial stress, saying the fare restrictions were unsustainable amid rising fuel costs and operational disruptions.

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In a March 12 letter seen by Reuters, the Federation of Indian Airlines, representing IndiGo, Air India and SpiceJet, cautioned that airlines could be forced to withdraw routes and delay fleet and network expansion if the caps remained in place.

The industry body said carriers were already under pressure even before the Iran conflict, citing a Pakistani airspace ban that has forced longer international flight paths, increasing fuel burn and costs.

IndiGo's woes triggered relief; Iran war may take it back

India had imposed fare caps in December following widespread disruptions triggered by mass flight cancellations by IndiGo due to operational issues. The government capped ticket prices based on distance, with a ceiling of 18,000 rupees for a one-way journey.

While the immediate crisis has since eased, the caps remained in place without a clear timeline, squeezing airline revenues at a time when jet fuel prices have surged due to the West Asia conflict.

Also read: Indian airlines seek fare cap removal as Iran crisis hits operations

“If the current situation continues, airlines will face severe financial losses, pushing several operators closer to unsustainable financial conditions and potentially threatening their continued viability,” the letter said.

Airlines have also flagged additional regulatory pressures, including a directive requiring at least 60% of seats on a flight to be offered without seat selection charges, warning it could further distort pricing and lead to higher fares.