Airfares have jumped significantly on certain routes. The government has asked airlines to devise a mechanism to ensure reasonable airfares amid a surge in air ticket prices, particularly on certain routes earlier served by grounded budget-carrier GoFirst.
The recent ACI study on airfare trends in the Asia Pacific region also indicated that airfares have soared above pre-pandemic levels despite steady airport charges and fuel cost. The cost of ATF has fluctuated in the recent past but not as much airlines start passing on the cost to passengers.
Post pandemic recovery for major airlines has also been encouraging with many carriers reporting record revenue and profit growth in last one year on back of travel rebound. Higher fares are also necessitated by airlines’ need to compensate for Covid period losses and manage higher employee cost on account of overall staff shortage.
Data from travel search engines and booking portals revealed that flight ticket prices have gone up close to 30 – 50 per cent on certain domestic sectors. However, the important point to note here is that the steep hike is only observed on the 24-hour window, or for less than 1-month window for a few destinations. Analysis has shown that air fares on tickets booked before one to three month of travel are largely in line with earlier levels.
This indicates the rising airfares are result of heightened demand for travel in the industry. But has the rising air fare trend affected the travel and tourism industry? The answer is not so much. Indian travellers seem largely unmoved on changing their travel plans just because of more fare. The two years of Covid-induced confinement has ignited an increased intent to travel more frequently. A new trend which was not prevalent in the pre-Covid era.
While there is tighter supply overall to support fares, studies indicate travellers are willing to pay more for travel. A survey done by Booking.com of more than 25,000 adults planning to travel in the next 12-24 months revealed that many customers are ready to pay higher fares to make up for lost opportunities during covid pandemic.
A study conducted by ACI Asia-Pacific and Flare Aviation Consulting revealed a disturbing trend of international airfares increasing by up to 50 per cent and domestic fares rising by less than 10 per cent across the top 10 aviation markets in the Asia-Pacific. Besides India, the other markets that saw the highest airfare increase are the United Arab Emirates (34 per cent), Singapore (30 per cent) and Australia (23 per cent).
The daily passenger count as maintained strength month-on-month during the summer travel season with healthy average daily domestic traffic at 427,000 levels in Q1 FY24 with increasing PLFs. The gradual decline in top-10 airports’ share in overall traffic is also indicating increasing air travel penetration in India. Delhi, Mumbai, Bangalore and Hyderabad continue to maintain top spots.
Average ATF prices have corrected in the range of 11-15 per cent between Q4 FY23 and Q1 FY24. As per IATA, “In recent months, the crack spread has narrowed from 34 per cent in 2022, and the full-year average crack spread is expected to fall to around 23 per cent in 2023, which is more closely aligned with the historical average rate.”
Moreover, IATA has also predicted a robust outlook for international air travel from India hence indicating strong airlines’ profitability in CY23.
