Bookings down 8% as airlines raise fares

Fare hike will result in 5% fall in passenger traffic in September, a drop in fares

The steep rise in airfares last week has resulted in a drop in bookings, with people deferring their travel plans, online travel portals have said.

“We are seeing seven-eight per cent reduction in bookings since last week. Advance bookings have come down. But bookings closer to date are not impacted, as people have planned engagements and events,” said Sharat Dhall, chief operating officer of Yatra.com. He added the rise in fares would lead to a five -per cent decline in passenger traffic in September and, subsequently, a drop in fares.

“While airfares on metro routes have increased 13 per cent compared to the corresponding period last year, the rise is 91 per cent compared to July 2013. The dramatic increase and the magnitude of the rise have definitely shocked travellers. Also, there is a lot more search, as people try to book better advance fares. We have witnessed queries-to-booking conversion falling about 15 per cent in the first week of September. We expect this to normalise through the next few weeks, as passengers get used to the revised rates. The booking composition hasn’t changed much, except for a couple of days between the announcement of the ATF (aviation turbine fuel) price rise and the increase in airfares, wherein a lot of tickets were booked well in advance,” said Rajesh Magow, co-founder and chief executive, MakeMyTrip.

With the depreciation of the rupee increasing ATF costs and lease rentals, airlines face financial pressure. Experts expect the margins and profits of airlines would be hammered in the September quarter.

To offset this, airlines had increased fares 20-25 per cent across the board.

But following the rise in fares, bookings have dropped and passenger loads stand at about 65 per cent, considering this is a lean season in the domestic market. “The domestic market was growing 9-10 per cent. But now, it has become flat. I think overall traffic would fall five-seven per cent. I believe airlines would need to do a rethink about the fare rise, as capacity is increasing and demand has turned negative,” said Ankur Bhatia, executive director of Bird Group.

According to a travel sentiment survey commissioned by Tripadvisor, inflation, the falling rupee and high airfares are impacting holiday budgets. However, travelle Rs are choosing to revise, not cancel holiday plans.

Of the respondents, 46 per cent said high air fares were the major cause of the rise in travel budgets; 48 per cent believe airfares to popular tourist destinations have been consistently higher this year compared to the last. “Recent flight deals and discounted fares have not managed to reverse this perception completely, as 37 per cent believe air ticket sales do not offer lucrative discounts to popular or relevant destinations, compared with only 21 per cent who said recent airline deals and discounts have made flying cheaper,” Tripadvisor said.