Airfares bite, no ‘low-cost’ flight in the sky now

Airlines will monitor passenger response during the difficult months of July to September

Airlines will monitor passenger response during the difficult months of July to September

With rising fuel prices, domestic and international airfares have seen an increase of up to 50% in recent months, according to data from online portals.

A ticket from New Delhi to Mumbai booked on Saturday for a flight within the next 15 days will cost a customer ₹8,576 compared to ₹5,675 in January this year, an increase of 51%. Similarly, a plane ticket from Bangalore to New Delhi in the same booking window will cost ₹9,674, an increase of 38% from ₹6,984 five months ago. And, a plane ticket from Mumbai to Varanasi is up 47% to ₹8,565 from ₹5,810 in January.

Data from travel portal ixigo shows airfares were 27% to 50% higher on various domestic routes, even in May.

“Current rates are the highest we’ve seen on the domestic side post-COVID,” says Manan Bajoria, VP, Growth Marketing & Analytics, ixigo.

Still, airlines carried the highest number of passengers since the pandemic in May with 1.20 crore passengers.

International flights that returned to pre-COVID-19 levels from March 27 are also more expensive than in 2019. A one-way Mumbai-New York in May 2022 was ₹70,296, an increase of ₹53 % compared to ₹33,265 in May 2019. , and an air ticket for a Bengaluru-London flight at ₹51,223 was 18% more expensive and Mumbai-London was 52% more expensive.

“However, despite rising airfares, interest in international travel this summer is strong due to pent-up demand, with international travel fully resuming after 2 years. Southeast Asia, the Middle East and Europe are the top summer destinations this year, and search queries for the UAE, US, UK and Canada are growing weekly,” says Bajoria.

Recently, SpiceJet Chairman and CEO Ajay Singh said airlines had no choice but to increase fares immediately and that a minimum increase of 10-15% was needed to secure a cost sustainable operation. He attributed this to a 120% increase in ATF prices since June 2021 as well as the weakening of the rupiah as a significant portion of airline costs are denominated in dollars. Fuel, he said, now accounted for more than 50% of the airline’s operating costs, higher than previous levels of 30% to 40%.

Vistara CEO Vinod Kannan also said an increase in airfares was “inevitable”. IndiGo has also called for the need to raise the cap on government-mandated fare bands for bookings 15 days before departure.

The rising cost of the ATF has forced airlines around the world to raise airfares, and the International Air Transport Association (IATA) in its latest global outlook says such a move will not deter travelers. due to massive pent-up demand for travel after a two-year gap as well as personal savings accumulated during the pandemic, but price insensitivity may fade in 2023 as consumers have made up their travel shortfall.

While rising airfares have so far been buoyed by strong travel demand, airline CEOs will watch how passengers react to the rise once the summer holidays are over and the industry enters. in the lean travel season from July to September.

“We have to cross our fingers, wish, pray and see what happens,” Vistara’s CEO recently told reporters. Larger players in the market such as IndiGo, with a much larger number of planes to fill, will determine the direction other players take.

“We hold 9% market share. 91% of the market determines rates and prices to some extent. Where I bring some value to the table and I can justify that value, which is international and certain [other] routes we will try to do [raise fares]. But on other roads, we will have to see how the market behaves.

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