Why airfares have either fallen or stagnated, post-Covid Business News

Average one-way airfares fell on 20 of the 32 routes, with wide variations between 1 percent and 32 percent. For the 12 routes with higher fares, five routes have an increase of between 1 percent and 2 percent and the remaining 7 routes have an increase between 8 and 27 percent, according to Ixigo’s data.

Among the 32 routes, the biggest decline was seen for the Chennai-Kolkata route with the average one-way airfare down 32 per cent year-on-year to Rs 5,688. On the other hand, the highest increase was on the Delhi-Jaipur route where the average fare increased by 27 per cent to Rs 3,273.

To be sure, airfares depend on demand and supply dynamics at the individual route level, which can throw up exceptions to the general trend. For example, even when the broader trend points to flat or low fares, there may be cases where demand significantly outstrips seat supply, driving up fares.

Another key factor to consider is the advance booking period. While the general rule is to book flights as early as possible to pay less, there can be exceptions to this rule. In cases where demand is strong and load factors are healthy, fares may increase closer to the travel date. However, if the expected passenger load is weak, there may be cases where ticket prices drop substantially just before the travel date. Long delays and cancellations due to air traffic disruptions, including those related to weather, can also increase fares at the eleventh hour.

According to airline officials, there are clear signs that the phenomenal rate of demand growth seen by the industry in 2022 and 2023 is beginning to moderate, even as major Indian carriers – IndiGo and Air India group airlines – continue to add capacity. New aircraft are introduced every month. Aircraft groundings due to engine problems and supply chain problems have also decreased in recent months, making more airline seats available for sale.

Aviation turbine fuel (ATF) prices have also cooled from last year’s highs. ATF typically contributes 35 to 40 percent of the operating expenses of Indian airlines. For instance, ATF price in Delhi for the current month — Rs 91,856.84 per kiloliter — is down 13.5 percent on a year-on-year basis.

In its September quarter earnings, the country’s largest airline IndiGo reported that its available seat kilometers (ASK) – a measure of its seat capacity – was 8.2 per cent higher than in July-September last year. As of September 30 this year, IndiGo had a fleet of 410 aircraft, with 334 aircraft by September 30, 2023.

In the last 18 months or so, the Air India Group has inducted 100 new aircraft, taking the combined fleet to around 300. In the past year alone, group airlines have delivered an average of one new aircraft every six days and this trend is likely to continue. It will continue for a few months, Air India CEO Campbell Wilson said in a recent interaction with reporters.

At the end of October, IndiGo announced that it has started to see a decrease in the number of aircraft grounded due to engine problems, and expects these numbers to gradually decline in the coming months.

IndiGo’s aircraft grounding peaked in the “mid-seventies” in the July-September quarter. Now it has fallen to the ‘high-sixties’ and is expected to reach the low 60s by the end of this year and the ‘mid-forties’ by the start of the next financial year, said Gaurav, the airline’s chief financial officer. Negi said on an Oct. 25 investor call.

On the demand scenario, IndiGo CEO Peter Elbers told investors on that call: “…as experienced in the global market, we have also seen some normalization in demand over the last few months from a very high base last year. “.

A senior official at another Indian airline agreed. “There was significant pent-up demand that was sketching the demand-supply equation last year. Also, don’t forget that Go First also went out of business last year, somewhat hampering supply. Now, demand growth is moderating to a more realistic level. And carriers have also been able to add capacity at a faster pace,” said the official, who did not want to be identified.

High airfares became a major pain point for most travelers in 2023, prompting the government to monitor fares and advise airlines to keep ticket prices reasonable. Air fares in India are not regulated by the government and are market driven.

Source: Ixigo