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Why air fares are up

india Updated: May 21, 2013 02:35 IST
Tushar Srivastava
Tushar Srivastava
Hindustan Times
Highlight Story

Here’s something that won’t sound like music to your ears. The cost of air tickets, already ruling at high levels, will not come down in a hurry.

And the imminent entry of globally acclaimed low-cost carrier Air Asia in a joint venture with the Tata Group will not lead to lower fares for at least another year.

The rising air fares are a direct result of the demand-supply mismatch in the Indian domestic market following Kingfisher's closure. The low-cost Kingfisher Red shut shop in September 2011, and the full service Kingfisher was grounded in October 2012. The two airlines, at their peak, had a market share of around 20%.

While demand has remained constant, the number of airline seats available has fallen 18.5%. So, it's no surprise that prices have gone up.

“I don’t see any major drop in ticket prices this year. Fares this May are 10% higher than what they were last year. Unless additional capacity is added, fares won't come down,” said Sharat Dhall, president, Yatra.com said.

However, AirAsia India’s entry will take time as the new airline still has to get approvals from the aviation ministry and the Directorate General of Civil Aviation, the aviation regulator. Moreover, it will take at least six months to ramp up capacity. Therefore, the impact of its entry (read: cheaper fares) will be felt earliest in mid-2014 assuming that it starts operations in winter this year.

Meanwhile, passengers are being asked to cough up more. “The cost of flying has actually increased. The base fare has hardly come down and other than frequent flyers, who travel with a single hand bag or bag less, all others have to pay for all services they use,” said Rajji Rai, chairman of Swift Travel International, a leading travel agency.

The aviation ministry had recently advised airlines to charge less for spot fares (tickets bought at short notice) so that planes don’t fly empty.

Indian carriers, the ministry had argued, on an average, have load factors of 75-80%, which means that at least 20% of the seats in an aircraft are vacant each time they fly.

Airlines, however, were cold to the idea. “It should be left to airlines to decide if lowering spot fares will help them or not,” said an executive of an airline who did not wish to be identified.