The discontinuation of fare caps with effect from 31 August has led to a 30% drop in airfares across routes, offering some relief to travellers who had to pay up eye-watering fares over the past few months as airlines passed on soaring fuel prices to customers.
“We have seen a drop of up to 30% in the fares of domestic routes. We have witnessed that the fares around the festive days are lower compared to the prior prices with the inclusion of fare caps. The hike or reduction in the fares also varies across different routes,” said Bharatt Malik, senior vice-president, flights, Yatra.com, an online travel company.
While domestic fares have dropped by 30% on average, there has been a steeper 40-70% drop on the busy Mumbai-Bengaluru and Delhi-Mumbai routes. The fare for a Delhi-Mumbai flight has dropped about 40% to around ₹5,500 from ₹9,000 in May. The decline in ticket prices for a Mumbai-Bengaluru flight is an even sharper 70-75% if one compares the current starting fare level of around ₹2,000 to the fare level of ₹8,500 in May. Similarly, fares on the Delhi-Bengaluru route have fallen to around ₹7,000 from nearly ₹10,000 in May.
“Price relief is anticipated to last for a while longer, but once the holiday travel season starts, airfares tend to increase. However, prices may not return to pre-covid levels. The cost of fuel, losses reported by airlines, and other factors are the main causes. However, the holiday deals may offer some comfort at this time,” said Nishant Pitti, chief executive and co-founder, EaseMyTrip.
The drop in airfares is also expected to arrest the shift of air travellers to railways, a trend seen for overnight or short-distance journeys amid soaring air ticket prices.
“The difference becomes significant when a family of four is travelling. Fares had soared to around ₹9,000 for a Delhi-Mumbai flight. This became nearly ₹75,000 for return flights for a family of four. As a result, several travellers opted for a second AC train journey, where the same return journey was for ₹32,000-33,000,” an industry expert said.
While this is good news for the customer, the airlines are bracing for an impact owing to higher expenses and lower revenues. Aviation turbine fuel, which accounts for up to 40% of an airline’s expenses, has seen a more than 60% rise since January to ₹1.22 lakh per kilolitre in Delhi. In addition, the entry of Akasa Air has increased competition.
“Despite an expected improvement in passenger traffic, the industry is estimated to report a net loss of around ₹15,000-17,000 crore in FY23 (as against an estimated net loss of around ₹23,000 crore in FY22) due to elevated jet fuel prices and the recent depreciation of INR vis-à-vis the dollar,” ICRA said in a recent note.
The government had implemented an upper and lower limit on airfares at the onset of the pandemic in May 2020 to prevent any sudden surge or decline in airfares. It discontinued the fare caps more than two years later.
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