Government removes domestic fare caps as airline operating costs skyrocket; flying to cost more

NEW DELHI: Brace yourself for steeper domestic airfares as airlines will now be able to pass on their hugely escalated operating costs to passengers from next week. The domestic airfare cap of Rs 18,000 (UDF, passenger security fees & taxes extra) that was imposed on Dec 6, 2025, during the IndiGo crisis will be lifted from Monday (March 23).

While the aviation ministry order removing fare caps says “excessive or unjustified surge in fares during periods of peak demand, disruptions, or exigencies, will be viewed seriously” and that fare caps or other interventions can be re-introduced “if required in public interest,” airline are facing their biggest crisis since Covid six years back. Their dollar-denominated costs have skyrocketed with the rupee plunging to new all time lows on a daily basis during the ongoing Israel-Iran war, and aviation turbine fuel (ATF) pricing going ahead remains a big concern.

International airfares have already been very high since the Iran-Israel war as operating airlines’ capacity to and from the west has shrunk and the big three Gulf carriers are flying very few flights.

Since airlines have not got any fiscal relief on ATF excise (from Centre) or VAT (from some places like Delhi and Mumbai), they had categorically asked the govt to cap airfares if their costs can be similarly capped too. While IndiGo and Tata Sons’ Air India group have deep pockets, most of the other Indian airlines are struggling to remain afloat.

Unable to get any fiscal relief on ATF pricing so far, the aviation ministry removed fare caps while asking airlines to “exercise pricing discipline and act responsibly.” With IndiGo flight schedule fully restored now and “with restoration of capacity and normalisation of operations across the sector, it has been decided that fare cap shall stand withdrawn with effect from March 23, 2026…. Airlines shall ensure that fares remain reasonable, transparent and commensurate with market conditions, and that passenger interests are not adversely impacted.”

Airlines say while costs have gone through the roof, there is a limit to fare hikes as that affect demand. “The financial impact of this crisis is yet to be fully felt, as although the spot price of jet fuel has more than doubled, most of the impact will only hit us from next month. We, like other Indian carriers, have already imposed a fuel surcharge on new tickets to help mitigate this imminent cost increase, but not every customer is willing to pay higher airfares so there is a limit to how high we can price before demand drops,” Air India CEO Campbell Wilson said in his weekly message to employees Friday.


Ready to Make a Smarter Property Decision? Build Your Legacy with TOI Homes.