India has recorded the highest surge in airfares among other countries in Asia Pacific and Middle East, which is seen as a ‘threat’ to the civil aviation industry’s long-term recovery. According to the Airports Council International (ACI Asia-Pacific), there has been a 41% hike in the airfare in India, followed by United Arab Emirates (34%), Singapore (30%) and Australia (23%).
The central government said that the rise in airfares have been seen on select routes. Moreover due to the Centre’s intervention, prices have reduced by 60%.
Earlier, Union aviation minister Jyotiraditya Scindia said the airlines had been conveyed about ensuring to keep ticket prices within a certain limit. The Union civil aviation ministry has also given a clarification on the factors behind dynamic airfares and reasons behind their rise.
What drives the dynamic airfare?
In order to keep the civil aviation business competitive, the prices are kept dynamic and they change based on the current market demands using the algorithm approach.
According to the ministry, the lower fare in the fare bucket is available for advance booking much earlier. As time lapses and date of journey approaches closer, the fare in higher side of fare bucket is made available as per the respective airline policy.
There are multiple factors responsible for the fluctuations in the airfare in the Indian market. It is based on season, holidays, festivals, long weekends, events, market forces, competition on route, distance on route and seat demand.
Moreover, air traffic is usually seen more in May and June along with October and January. The airfares are also dependent on the operational constraints at an airport.
Who regulates airfares?
After the repeal of Air Corporations Act in 1994, the airfares are not regulated by the government. Airlines have been given a free hand to charge reasonable air fares as per their operation viabilities subject to compliance to Rule 137 of the Aircraft Rules, 1937.
The Directorate General of Civil Aviation (DGCA) is only an aviation safety regulation body and it doesn’t determine the tariff for airlines.
Similarly, most countries have also deregulated their aviation sector which enabled charge reasonable air fares as per their operation viabilities subject to compliance to above said rule.
Why is there a spike in airfares?
The surge in demands following the opening of markets after the Covid-19 pandemic, and rise in aviation turbine fuel (ATF) prices and supply chain disruptions after the advent of Ukraine-Russia conflict resulted in the hike of airfares, according to the ministry.
“In a de-regulated environment, introducing fare caps on various sectors will lead to market distortion. The benefits of market competition will not be available to passengers at large,” it added.
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