Airfares Soar As Carriers Eye Profits To Make Up For Covid Losses

Indian airlines, revitalised by revenge travel and business trips, are hiking airfares as far ahead as December to make up for losses incurred during the pandemic.

Aiding them is the government's decision to remove the cap on airfares from September.

The net result: airfares on an average are up 20% compared with a year earlier, according to Ishan Agrawal, founder of Surat-based travel firm The Grand Holidays. “Airfares on several major routes seem to be the highest in the last four years.”  

Air travel platform EaseMyTrip said the prices have risen, but not on all routes.

"Prices are dynamic in nature; a few sectors and airlines have decreased airfares by close to 15-20% and many to 30%," Nishant Pitti, chief executive officer and co-founder at EaseMyTrip, said. "However, a few sectors like Delhi-Mumbai and Mumbai-Bangalore are having an increase in airfares by 20-25%."

The elevated prices suggest that airlines are eyeing higher cash flows as demand for air travel hasn't changed drastically from last year.

The two listed carriers—IndiGo, operated by InterGlobe Aviation Ltd., and SpiceJet Ltd.—have reported losses in nine of the last 10 quarters.

Owners of travel firms say demand has remained similar to corresponding period of the previous year, but flight ticket prices have increased across routes, from popular metro-to-metro routes to Tier-II and III routes.

On some routes, prices have spiked by 40%, said Prakash Agrawal, owner of Ranisati Enterprises Ltd., a travel company largely catering to corporate clients. The skyrocketing airfares, stretching as far as December, have started to impact the business now, he said.

While booking advance tickets for a corporate client on the Mumbai-Kochi route for December, Agrawal saw the prices hit as high as Rs 13,000-14,000, which typically should be around Rs 4,000.

"Even on popular routes like Delhi-Mumbai, the fares have touched Rs 7,000, up from the usual Rs 5,000," said The Grand Holidays' Agrawal.

Another reason for the steep rise in prices could be a preference for IndiGo due to its strong network coupled with various issues with rivals, including rescheduling and safety. Also, Air India and Vistara do not offer many options in the domestic market.

"Airfares have risen by almost 50% since the pandemic due to increase in ATF and ... the pent-up demand that is being witnessed across the industry," Pitti said.

SpiceJet Ltd. is currently forced to operate only 50% of its total capacity, after multiple safety snags were reported, according to an order of the Directorate General of Civil Aviation.

The cap on airfares had been introduced after Covid-19 to protect both airlines and passengers from extreme prices.

Pitti said airfares are set to drop due to the removal of caps by the government. The festive rush also impacts the pricing as it is considered the peak season, he said.

According to Jyotiraditya Scindia, India's aviation minister, the decision to remove the cap was taken "after careful analysis of daily demand and prices of air turbine fuel".

“Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future,” he tweeted after the limits were removed.

For passengers, however, that means costlier travel.