Holidaymakers have made hay this summer, cashing in on lower fares pretty much all across the country. Airlines, though, have felt the heat with the higher seat capacity raising the competition and lowering occupancies.
Holidaymakers have made hay this summer, cashing in on lower fares pretty much all across the country. Airlines, though, have felt the heat with the higher seat capacity raising the competition and lowering occupancies. While more passengers have flown to their destinations, this time around — near 12 million in May this year compared with 10.2 million in May 2017 — airlines are likely to reap lower yields; fares in May and June have been lower by about 4-8% than in the comparable period of 2017. The double whammy comes from higher fuel costs, up by about 29% year-on-year (y-o-y).
To make up, airlines have increased prices for tickets bought 0-15 days before travel period. “For travel booked a month in advance, fares are still low due to competition and more seats,” Balu Ramachandran, head, air and distribution, Cleartrip, said.
Online travel portal Yatra.com shows return fares on busy sectors like Delhi-Bengaluru, Delhi-Chennai and Delhi-Hyderabad were lower during May and June in 2018 for travellers booking 30 days ahead.
However, fares on the Delhi-Mumbai route were up by 5% since relatively, less capacity has been added. This is because the Chhatrapati Shivaji International Airport can handle an annual capacity of 48 million passengers.
Sharat Dhall, COO (B2C), Yatra.com, said the capacity addition across airlines had depressed fares even in the peak summer season. A senior airline executive said tough market conditions have compelled airlines to operate efficiently. “Airlines are looking to use fuel-efficient aircraft and also run them efficiently,”the executive said.
Kapil Kaul, CEO and director, Capa India, said the FY19 results for airlines will be impacted by rising fuel costs, a weaker rupee and capacity addition. “Domestic carriers will be tested in Q2 — the weakest for air travel — with these issues,” Kaul said.
Yields for IndiGo in Q4FY18 were lower by 3.2% not surprising since the seat capacity at the airline increased to 5.7 billion in May, up 10% y-o-y.
For Mumbai-based Jet Airways, domestic ASK (available seat kilometres) in FY18 stood at 22.7 billion versus 20.4 billion in FY17, up by over 10% on a y-o-y basis. Ajay Singh-led SpiceJet metered 17% more domestic ASK at 19.4 billion in 2017-18 compared with 16.6 billion in FY17.
The majority of the capacity addition has taken place on metro routes which are more profitable for airlines. The overall domestic ASK for Indian airlines in FY18 stood at over 130 billion and is likely to double in FY22 as per industry estimates. Metro cities such as Delhi, Mumbai, Bengaluru, Kolkata and Chennai contribute over 70% to the overall domestic traffic. DGCA data show Indian airlines flew 117 million passengers in 2017, up 17% y-o-y.
By- Arun Nayal