The Italian government on Tuesday dialled down its plan to cap airfares for flights to Italian islands after airlines including Ryanair (RYA.I) challenged the legality of its initial proposal.
The government will now give the country's antitrust authority the job of policing prices for internal Italian flights to destinations such as Sicily and Sardinia.
The change was proposed in an amendment - still subject to approval in parliament - to a government decree announced in August. Ryanair had said the decree was "illegal and unenforceable" and challenged it at the European Commission.
The government had initially said it was seeking to ban airlines from raising fares to Sicily and Sardinia beyond "200% higher" than the average price for flights.
Industry Minister Adolfo Urso told reporters on Tuesday that there would "no longer be a ceiling" on prices but added that the main elements contained in the decree had been maintained.
The antitrust body, which can impose fines on companies, will be able to intervene during periods of peak demand, such as summer or national holidays, and when the ticket price a week before a flight to the islands is more than 200% higher than average.
Italy's National Union of Consumers said the antitrust body should be given enhanced powers to regulate fares.
"This is not enough," said Massimiliano Dona, the president of the group.
"The antitrust needs to be able to intervene not just for an abuse of a dominant position or an agreement restricting competition, but also in the case of unfair business practices," he said in a statement.
A representative for Ryanair, the largest airline in the Italian market, told Reuters it was too early to express judgement on the government's revised measures.
Other airlines operating in Italy had criticised the plan, saying they could breach EU free market rules.
The antitrust regulator last December opened an inquiry into possible price-fixing for flights in and out of Sicily over Christmas by airlines including Ryanair, Wizz Air (WIZZ.L) and easyJet (EZJ.L).
