India wants cheaper air travel, but capping fares could hurt aviation industry

In the mid-90s, it cost about ₹6,000 to fly between Chennai and Mumbai. In 2026, it's hovering around the same price.

This, despite crude soaring to $85 a barrel from $20, and without judicial intervention on pricing. The number of planes in Indian airspace has grown 4x, one Indian airline featuring among the world's Top 10 by market value. India's also the third-largest aviation market, with some of the swankiest airports in the world.

In this landscape, an issue pending in the Supreme Court pertains to a demand to cap airfares and come up with a consumer-facing regulatory body. GoI has promised the court that a policy is round the corner. This comes at a crucial juncture when India's on a drive to promote tourism and improve air connectivity. Can price controls help this agenda?


Price control rhetoric is politically popular across the world. India's hardly new to price control either. Liberalisation is partly the freedom from controls that crippled entrepreneurship for decades.

Demand for capping airfares falls in the 'zero-sum' fallacy category, where someone is believed to be gaining at the cost of someone. Air travel is an economic transaction between airlines and flyers. Such voluntary transactions wouldn't take place unless both parties were better off making these transactions, than not making them at all.

Millions of Indians travelling by air underlines a mutual benefit, and that current terms are acceptable to both. Some disagreeing to those terms and seeking intervention isn't helpful for flyers willing to pay market fares and an industry that directly employs lakhs.

Look no further than rent control to see the long-term impact of price caps. Almost every big city - from NYC to Melbourne to Mumbai - froze rents to help people from forever-rising prices. It probably helped those already settled into those homes from stumping up more. But what they were left with after a few years was crumbling buildings and housing shortages, as few came forward to build new apartments. Scarcity deprived people willing to pay higher rents. So, an occasional pop-up of exorbitant prices on travel portals, or an irritating demand for ₹100 more for seat selection, shouldn't be a trigger to make an essential industry commercially unviable.

What India's aviation industry needs is a bigger policy push to expand and add more players, than threaten new entrepreneurs with restrictions. Air India, once a state-owned monopoly, is reeling under losses of thousands of crores of rupees, some fearing whether it'll survive in its current shape. SpiceJet has been in ICU for a long time, with not only sliding passenger trust but also litigation and financial woes.

The list of airlines in India that went bust is long. There are a few trying to take off. But if policymakers take a misstep at this crucial stage, they would be leaving the ground open for a near-monopoly for an already dominant IndiGo. And even the 'best-run' airline can see its fortunes slide. IndiGo reported losses for two straight quarters, thanks to spike in crude oil prices. Seeking judicial intervention in a world throwing up so many challenges, which even some of the best in the business can't get on top of, is misplaced.

Air travel is today accessible to the middle-classes, and even to the less well-off in emergencies. Courts and the government, neither of which has control over crude oil prices or aeroplane lease terms, are at a disadvantage. Just a government nudge has had desired impact whenever there were sharp spikes.

If the objective is to connect more cities and make air travel affordable, the solution is not in price caps that would drive entrepreneurs away, but to lure more to get into the airline business. Price caps would do the opposite of luring them.