With passenger traffic almost hitting the pre-pandemic level in the first two months of the year, coupled with a constrained capacity, airlines have warned that the surge in air fares witnessed now will be the new normal as demand continues to outstrip supply.
Airfares during January and February this year were about 25-40% higher than the same months during the pandemic-hit 2020, according to ticket booking agencies. Certain popular routes are reporting an even steeper jump. Despite the increase in fares though, there has been no negative impact on passenger traffic.
While the deficit between domestic passengers flown by the end of 2022 (123.3 million) against the pre-pandemic year of 2019 (144.1 million) stood at 14.4%, the deficit reduced to under 3% during January and February this year (24.4 million) as against the same two months in 2020 (25.15 million), according to data supplied by the ministry of civil aviation.
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Indiver Rastogi, president and group head, Global Business Travel, Thomas Cook (India) and SOTC Travel said, “Strong continuum in demand from corporate and leisure segments, hike in ATF prices and removal of the cap, has resulted in surge in airfares of approximately 25-30% to high-load destinations for the January-February period v/s 2019.”
With passenger load staying above 85% and the pace of new aircraft additions remaining under constraint with stable cost of aviation turbine fuel (ATF), airline companies are expected to cash in on the opportunity of pushing their margins.
“With the market forces at play and an ongoing strong demand trend, we will continue to add capacity. The airfares are dependent on dynamic pricing and as long as demand sustains, the prices will remain at similar points,” said an IndiGo spokesperson.
IndiGo, which is the market leader with a share of 55%, has already deployed more capacity than pre-Covid period. The company is operating at 1,800 daily flights as against 1,600 during pre-pandemic. The airline added that bookings for the fourth quarter so far are strong. Vistara, India’s third biggest airline, has also pumped in more capacity to meet demand. Vistara is currently operating over 275 flights per day as against 200+ daily flights compared to pre-pandemic period, a company official said. Air India did not reply to the query at the time of going to press.
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Nishant Pitti, CEO & Co-founder, EaseMyTrip said, “Airfares adhere to a dynamic pricing structure in which prices are set by a number of factors, including the appeal of the destination, the distance, the date of travel, and the proximity of travel dates to holidays or long weekends. While there are legitimate reasons why prices were higher than in previous years, the influence on demand seems to be unaffected and is actually improving.”
Following supply chain disruption pertaining to jet engines, more than 50 aircraft of IndiGo and Go First have been grounded, according to engine supplier Pratt & Whitney. Companies that have placed orders for new aircraft are facing delays due to the same global supply chain disruption, partly caused by the Russia-Ukraine war.