Airfares have firmed up across domestic routes but are much lower compared to previous years despite festive season rush for travel. While tariff on metro routes such as Delhi-Mumbai, Mumbai-Bangalore and Delhi-Kolkata has seen single-digit rise, the average fare on tier-II routes has not seen any significant increase.
“On metro routes, average fare has gone up in the range of 5-8 per cent this season. Ticket prices are not unusually high as seen earlier in spite of Diwali being round the corner. On non-metro routes there is almost no increase in fares,” said a Cox & Kings spokesperson.
A one-way Delhi-Mumbai ticket for journey on November 6 could be booked for Rs 4,960 from travel portal Makemytrip. Even on Diwali day an early morning flight by Air India could be booked for as low as Rs 3,757. Similarly, a passenger can book a Mumbai-Bangalore flight ticket by SpiceJet for Rs 5,492 for travel on the busiest festive day.
With enough capacity available airlines are not in a position to raise airfares much. So far, they have only marginally raised the fares to pass on a part of rise in input cost contributed mainly by high jet fuel price.
“To offset the increase in operating cost, the industry will have to raise average fares by 12 per cent – that too assuming there is no change in the passenger load factor. But the aggressive expansion plans of carriers and the race to maintain high PLFs will keep competitive intensity high and limit their ability to raise fares,” said Sachin Gupta, senior director, Crisil Ratings.
In a report on aviation sector, the rating firm said the industry could be staring at steepest loss in a decade and may report Rs 9,300 crore loss in this financial year.
“At an estimated Rs 9,300 crore, the industry’s losses at Ebit (earnings before interest and tax) would surpass the Rs 7,348 crore blow it was dealt in FY14. That was followed by three good years through FY18, when carriers reeled in aggregate profit of Rs 4,000 crore on average at the Ebit level,” Crisil said.
Adding to the woes of airlines, public sector oil companies on Thursday raised jet fuel price by 5.2 per cent. As jet fuel accounts for nearly 35-40 per cent of an airline’s operating cost the hike is a big blow to them.
Meanwhile, the fair market watchdog Competition Commission of India (CCI) is looking at algorithms used by airlines to determine fares, as part of a detailed probe into alleged fixing of air ticket prices.
Currently, the fair trade regulator is investigating allegations of similar pricing as well as simultaneous increase in ticket prices by the airlines. The cases pertain to steep fluctuations in airfares during the Jat agitation in Haryana and floods in Chennai, among other instances, in the last few years.
There have been instances of spike in air ticket prices during festivals and natural calamities. Earlier this year, some members in the Rajya Sabha sought a cap on airfares and the government has been maintaining that fares are deregulated.