New airfare rules kick in January 1; no routine price controls, Centre keeps intervention power

Such directions must be proportionate to the circumstances and can remain in force only for a specified period. The rules will come into effect from January 1, 2027. However, the rules do not specify what would constitute an extraordinary situation, prescribe a threshold for intervention or establish a ceiling on ticket prices. They also do not provide a formula for determining what airlines can charge.

Under Rule 192, airlines will continue to establish tariffs based on factors including their cost of operation. Scheduled domestic operators will have to submit their established tariffs to the Directorate General of Civil Aviation (DGCA) in the form and at the intervals specified by the regulator. The DGCA will monitor these tariffs. The rules also require all air transport undertakings to publish their tariffs on their websites or other digital platforms in a manner specified by the DGCA.

Airlines will have to display the total amount payable by passengers, along with a detailed break-up of the fare, taxes, fees, cancellation charges, refund conditions and any other charges, separately on booking websites and tickets. The disclosure requirement is aimed at improving transparency in ticket pricing and making it easier for passengers to understand the components of the amount they pay.

The rules define fees as amounts payable to service providers for passenger facilities or services, while taxes are amounts payable to the government. The earlier draft proposed a detailed methodology for airlines to determine fares, taking into account factors such as booking class, service characteristics, historical sector-wise yields, load factors, capacity, aviation turbine fuel prices and seasonality.

It also proposed that airlines submit their pricing methodology and changes to it, along with justifications, to a Tariff Monitoring Unit of the DGCA. Under the draft, airlines and their agents would not have been allowed to charge fares higher than those established under the approved methodology, with the regulator empowered to issue directions in case of violations. These provisions do not feature in the final rules.

Instead, the notified framework relies on tariff submission, publication, regulatory monitoring and the Centre's power to issue directions in extraordinary circumstances. This leaves airlines with greater flexibility in setting fares than envisaged in the draft, while retaining oversight by the regulator. The notification comes amid growing concerns over steep and unpredictable airfares, particularly during festivals, holidays and periods of disruption.

The Supreme Court has been hearing a public interest litigation seeking safeguards against arbitrary pricing by airlines and greater transparency in fare determination. On October 16, the Centre had informed the court that the rules had been finalised and would be published within two weeks. The court is scheduled to take up the matter again on November 16. The government has traditionally maintained that airfares should be determined by market forces, with airlines taking into account operating costs and other commercial considerations.

The new rules formalise a framework for tariff monitoring and disclosure, but stop short of introducing routine price caps or a prescribed mechanism to prevent steep increases.