Steep fare hike checks festival rush in airlines
Oct 20 2013 , Mumbai
This is bad news for the foundering aviation sector, as carriers traditionally face supply constraints during the season. The average passenger load factor dropped to around 50-55 per cent in the past fortnight, compared with 70-75 per cent for most airlines last year.
Industry experts told Financial Chronicle that the recent hike in airfare, beginning September, has hit traffic substantially. In certain routes, tickets booked in early September for a travel in November were almost 55-60 per cent higher. As a result, some carriers have been flying with empty seats.
An Airport Authority of India official confirmed that the load factor this season has been less than last year’s festival season. “Usually, flights are supposed to be choc-a-bloc with a lot of people visiting friends and families during October-November. However, the traffic looks much less this year. A major reason could be the recent fare hike,” the official told FC.
Rajesh Magow, co-founder and India CEO of MakeMyTrip, said, “Load factor is really low this time. The steep rise in airfares is definitely a reason. There is a hangover effect as even during a low season, fares were already on the higher side. The fares needed to be rationalised to sustain the airline business, as the current fare increase is too steep.”
“Even last year was not a great year, but the load factor was not this poor. It was over 75 per cent last year, but this time even 70 per cent looks quite difficult. Airfares tend to go up during festive months, but compared with last year this time, fares are up by at least 15 per cent,” said Sharat Dhall, president of Yatra.com. He said there was also a dampening effect on demand with a lot of leisure travellers postponing their plans, while many of them have been availing other modes, such as trains and buses.
However, airline officials are not too keen to concede poor sales.
According to Air India spokesperson GP Rao, load factor has been quite satisfactory.
“Festive months are when people visit families and friends. This is peak season when a lot of leisure travel happens because of vacations. We have been seeing good occupancy from all metro cities and compared with last year, there has been an increase in the load factor,” Rao said.
When informed that an Air India flight on October 14 from Kolkata to Mumbai, for instance, flew with a lot of empty seats, Rao said it was unusual. He said there was always a heavy rush in the Kolkata sector, and at times Air India found it difficult to accommodate passengers.
IndiGo, on the other hand, did not comment on the situation, saying the data for September was yet to be released and that load factor is measured for the entire month and not for specific days.
Airline companies were forced to increase fares because of high input costs and a weak currency, with the rupee dropping to 68.83 against the dollar in September. However, the currency has strengthened subsequently and closed at 61.26 to the dollar on Friday. Yet, airfares have not been reduced yet, despite lower traffic.
Both Magow and Dhall said though the stronger players may not be hurt as much as the weaker players, due to low volumes, a rationalisation of fares is expected over the next quarter, which is a lean season for the aviation sector.
PTI adds: Data for September released by the directorate general of civil aviation suggests domestic air traffic grew by over 4 per cent during this lean month, with Air India gaining strength in market share and load factor. All six Indian carriers together carried almost 457 lakh passengers between January and September as against 438 lakh during the same period in 2012, registering a growth of 4.23 per cent.
The six domestic airlines reported an over 13 per cent increase in the number of passengers flown in September at 45.55 lakh compared with 40.18 lakh passengers during the same period the previous year. While IndiGo continued to lead the market with 30.3 per cent, Jet Airways and its subsidiary JetLite had a share of 24.6 per cent. Air India’s domestic market share improved to 20.3 per cent from 17-19 per cent during the past several months and passenger load factor was the highest at 73.2 per cent in September.