Plunging fuel cost brings down airfares to new low
Have travel plans this new year? It may feel like yesterday once more, with spot air fares this week – in contrast to advance bookings – cheaper by up to 25% over prices last January.
For example, seats were available on online travel portal Makemytrip.com for as low as Rs 3,858 for a Delhi-Mumbai one-way air trip for Saturday, nearly 36% lower than the previous year’s average fares of about Rs 6,000.
Likewise, a Delhi-Kolkata trip came for as low as Rs 5311 compared to nearly Rs 7,000 last January.
This is a welcome dip after ticket prices seemed to touch the sky, even provoking an admonition from Prime Minister Narendra Modi.
Modi’s remarks in August, asking airlines to pass on the benefits of cheaper fuel to passengers, may not be the main reason for affordable fares, but falling crude oil prices have certainly helped release some of the price build-up that made domestic air travel unaffordable for many regular passengers.
For low-cost airlines, which spend less on amenities, aviation turbine fuel (ATF) makes up for about 50% of operational costs for a flight. For full-service carriers, this figure is 35%.
ATF prices, which directly move in tandem with international crude prices, have plunged about 26% in the last 12 months—to Rs 44.3 a litre currently from Rs 59.9 a litre a year ago—lower than petrol and diesel prices, implying it was cheaper to tank up a jet than a car.
“The reduction in jet fuel prices have provided us with more margins to play with and a portion of that has been passed to the passengers, lowering ticket prices significantly,” says a SpiceJet spokesperson.
The entry of two new airlines –Vistara and Air Asia—has also helped increase the number of seats on offer, further pulling down fares.
“Even for a new airline like ours, we are seeing improved financials thanks to lower fuel prices, and more number of passengers travelling by air,” says Phee Teik Yeoh, CEO of Vistara.
If all airlines fly fully-loaded at a given time, it translates to more than 400,000 Indians crisscrossing the skies to reach their destination.
“The industry has become more competitive with newer carriers like Vistara and Air Asia. SpiceJet has emerged from a phase of turmoil, as a stable player with new management and funding; and is rapidly building capacities,” said Mohit Gupta, chief operating officer of MakeMyTrip.com.