With the aviation sector battling its woes, flyers may continue paying more for air tickets, analysts tracking the aviation sector said.
With the aviation sector battling its woes, flyers may continue paying more for air tickets, analysts tracking the aviation sector said. It comes against the backdrop of the airfares rising by remaining on the higher side in the March quarter as against the corresponding period last year. The fares are expected to remain elevated starting the first quarter of the new fiscal, analysts noted.
The increased pricing power of the airlines, on account of sustained robust demand, pushed the airfares upwards from the third quarter of FY19, Kinjal Shah, Vice President, Corporate Sector Ratings, ICRA told Financial Express Online. The capacity constraints due to different issues in the sector led to prices rising further in the last quarter of FY19, she said, adding the surge was steep in routes with higher impact on the capacity.
“With the capacity yet to stabilise, we expect the fares to remain high in the initial part of Q1 FY2020 despite Q1 generally being the lean quarter. However, the fare increase has also impacted the passenger growth, with January 2019 witnessing a 53-month low growth of 8.9%, and February 2019 witnessing a new low of 5.6%. This may result in some rationalisation in the fares in the later half of the quarter,” she noted.
A recent CRISIL Research report had said that the airfares rose by 10-12 per cent in the March quarter compared to the same period last year.
“During Q1 of FY2020, we expect the fares to remain elevated due to the upcoming demand on account of summer holidays. However, the increase is not expected to be as steep as it was observed in Q4 FY19, as Jet Airways would be operating its grounded aircraft from Q1 FY20, led by board approval for the restructuring plan”, Hetal Gandhi, CRISIL Research, said in the report.
Grounding of planes and safety issues with Boeing 737 Max 8 aircraft also posed an impact on the demand-supply balance in the last couple of months.