Ash cloud lifts, airfares soar too

Written by Shaheen Mansuri | Mumbai | Updated: Apr 28 2010, 04:51am hrs
The flights have taken off, and so have the fares. In an attempt to make up for the losses when volcanic ash clouds grounded flights to the US and Europe for six days last week, airlines have started hiking fares. Travel agents say that fares have gone up by at least 20% on flights to the US and Europe .

The move comes despite a recent government request to domestic airlines not to profiteer from the disruption by hiking fares. Airlines, in their defence, claim that fares are anyway high during the holiday season, which have further gone up due to the eleventh-hour bookings. Flag carrier Air India and private carrier Jet Airways fly to

European cities like London, Brussels and Frankfurt, while Kingfisher Airlines operates regular flights to London .

On April 19, the Union civil aviation ministry had requested airlines not to resort to exploitative fares by overcharging stranded passengers or those who were transferred from one carrier to another. Over 40,000 passengers were stranded in India when the European airspace was shut following a volcanic eruption in Iceland, which spewed volcanic ash into the skies.

Says Iqbal Mulla, managing committee member of the Travel Agents Association of India (TAAI): Due to flight disruptions in European airports, carriers have a backlog, as passengers who were stranded before are in a re-booking mode. Besides, there are fresh bookings as well. In such a situation, they would want to make up for the dent in passenger revenues.

Mulla said that an economy class ticket from Mumbai to London now costs Rs 1 lakh-Rs 1.5 lakh, which is usually the cost of a club class ticket. On the India-US sector, prices have gone up to Rs 2 lakh, nearly 40% more than the regular fare. However, he added that there is scope for increasing fares, since travel demand has risen too. Overall, there has been a 30% rise in demand for air travel domestically and internationally, said Mulla.

An analyst said: It is unlikely that the lost revenues from the disruption can be recovered immediately. Hence, airlines have hiked fares on long-haul destinations.

However, Sonu Kriplani, vice-president, passenger sales at Jet Airways disagrees: It is the holiday season and if a person books tickets at the last moment, it is bound to be expensive. In fact, travellers who had to cancel their booking due to the volcanic disruptions in Europe , have postponed travel. She further added that there are different fare structures depending on the availability of seats. Over 12,000 passengers booked with Jet had to cancel tickets and reschedule their journey.

Airlines typically use A-330 wide-bodied aircraft on long-haul destinations, which has over 180 seats, with 8-10 seats in first class, 24 in business class and the rest in economy class.

Analysts say that though airlines had to abandon flights en masse on the Europe sector, overheads like lease rentals, interest cost, employee remuneration etc was still on. Besides, the disruption happened during the holiday season when passenger loads are the highest. Airlines collectively cancelled over 50 flights, with Rs 2 crore revenue lost per cancelled flight.

Meanwhile, the International Air Transport Association (IATA) has estimated that the ash cloud crisis has cost airlines over $1.7 billion in lost revenue in six days after the initial eruption, impacting 1.2 million passengers a day and reducing global aviation by 29%.

IATA chief Giovanni Bisignani in a recent statement said: The scale of the crisis eclipsed 9/11 when the US airspace was closed for three days. For an industry that lost $9.4 billion last year and was forecast to lose a further $2.8 billion in 2010, this crisis is devastating.

Singapore Airlines revealed that it lost around S$40 million in revenues from the recent flight cancellations.