High airfares, thin traffic this festive season

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SummarySoaring airfares are set to puncture festive season bookings on airlines, as per initial estimates of travel agents and airlines

Soaring airfares are set to puncture festive season bookings on airlines, as per initial estimates of travel agents and airlines. Despite this, airlines are unlikely to roll back the recent hike in airfares.

“The dramatic increase and magnitude of the spike has shocked travellers,” co-founder and CEO-India of MakeMyTrip, Rajesh Magow, said. “We have witnessed queries-to-booking conversion going down by nearly 15% in September first week even as there have been more people searching for better advance fares.”

While there was a spike in bookings in the last week of August, as customers sought cheaper advance booking fares, the pace of booking has slowed down now. “Since mostly families travel at this time to their hometowns or for a vacation, a 25% higher fare for four tickets (assuming an average family size is four) is a considerable cost to be factored in,” Expedia.com general manager of south and southeast, Asia Vikram Malhi, said. “Travellers booked airlines that had not increased their fares, to avoid paying extra for their holiday.”

Airline executives say this festival season, bookings will be lower by 25-30% than last year. However, this won't lead to a cut in fares from their existing levels. “The weak rupee and the rise in ATF prices have increased the pressure significantly on us and even if there aren't high load factors, we will keep the fares at the current level,” said an executive at Air India. “It's better to have a half-full airline with tickets being sold at profitable levels rather than fill up the plane with underpriced tickets.”

“That said, those who need to fly will fly regardless of the increase as during the festival season people want to go and meet their families. So, we expect some pick-up in bookings in the coming weeks,” the executive added.

The average increase in air tickets a week before departure between metro routes have gone up by 13% compared with September 2012 (at around R7,978). Over July this year, fares have gone up a whopping 91%. There has been a significant increase even on non-metro routes. The average fare for non-metro routes a week before departure in September 2013 is around R6,700, nearly 7% more than September 2012 and 66% more than July 2013.

The festival season is typically a profitable time for domestic airlines. “This year, things look a bit uncertain as there might not be a high amount of bookings,” said Rashesh Shah, an aviation analyst at Mumbai-based brokerage ICICI Securities.

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