Why are airfares in India soaring and is there a way to beat it?

Airlines look at affordability, demand, availability and lots of other factors when pricing their flights

Airfares in India have seen the biggest jump in Asia Pacific as airlines capitalise on low competition and pent up demand to increase profits and recover losses incurred during the pandemic, said trade body Airports Council International ( ACI).  

ACI conducted a study  of around 36,000 routes in the top ten aviation markets in Asia Pacific and the Middle East. It found that India saw the highest airfare increase of 41 per cent, followed by UAE at 34 per cent, Singapore at 30 per cent and Australia at 23 per cent.

International airfares, in particular, have seen a 50% increase in the September-December quarter of 2022, compared to the same period in pre-pandemic 2019.

 

"“Unexpectedly, in the first quarter of 2023, despite a progressive increase in traffic, domestic airfares have continued to increase in several of these markets, including India, Indonesia, Saudi Arabia, South Korea and Japan, only decreasing marginally on international routes.” It found that fuel prices and inflation were the main causes of the airfare increase.
 

While airfares in India began increasing in 2022 once travel rebounded after the Covid 19 pandemic, it has soared during 2023's   summer travel season. Go First’s bankruptcy  and subsequent suspension of its flights, surging demand amidst peak travel season and capacity constraints, has resulted in passengers having to pay a premium for their flight seats. Indian carriers do not have additional planes to immediately start new flights either.

Following the challenges with respect to engines from Pratt & Whitney, Go Airlines (India) was forced to ground half of its fleet owing to faulty engines. Consequently, it started defaulting toward payments to vendors, aircraft lessors and received notices from the lessors seeking payment. It also defaulted towards interest dues of the financial creditors as on May 4, 2023. The company then filed for voluntary insolvency before the National Company Law Tribunal (NCLT) and grounded its flights.  The low-cost carrier left a gap of over 300 daily flights.

Unsurprisingly, flights to and from cities like Srinagar, Pune, Ahmedabad, Mumbai, and Leh — where Go First had a sizable presence — had seen the biggest pressure on fares in the last one month. 

People who had booked seats in advance on Go First have been forced to make spot bookings for other airlines as Go First is not operating, which resulted in spot fares shooting up. 

As Business Standard reported earlier, "spot airfares on five of India's six busiest routes  jumped by up to three times in the past one month. However, for tickets purchased 30 days in advance on these routes, the fares have seen a marginal increase (not over 15 per cent).

On the Delhi-Mumbai route, which is India's busiest air route, the average spot airfare on June 1 stood at Rs 18,654, according to data provided by Ixigo. On May 1, two days before Go First's exit, the average spot airfare on this route stood at Rs 6,125.

Interestingly, the prices for tickets purchased 30 days in advance have not gone up much even after Go First's exit. In June, the average price for tickets purchased 30 days in advance on Delhi-Mumbai flights was Rs 5,475, which was 8.85 per cent more than in April."

High fuel costs, rupee depreciation adding to pressure to hike airfares 

Russia’s invasion of Ukraine has exacerbated the crude price rise in the last one-and-a-half years. "Jet fuel now represents as much as 38% of an average airline’s costs, up from 27% in the years leading to 2019. For some budget airlines, it can be as high as 50%," said a Bloomberg study.

Fuel prices went up 76% in 2022 compared to 2019. 
 

"Despite a healthy recovery in passenger traffic, the domestic aviation industry continues to face challenges on account of elevated ATF prices and depreciation of the INR vis-à-vis the US$ compared to the pre-Covid era, both of which have a major bearing on the airlines’ cost structure. While the ATF prices have witnessed a sequential decline over the past five months, with June 2023 witnessing a sequential and a YoY decline of 7% and 27%, respectively, they still remain at elevated levels when compared to the pre-Covid era. The airlines’ efforts to ensure fare hikes proportionate to their input cost increases, will be key to expanding their profitability margins," said Suprio Banerjee, Vice President & Sector Head - Corporate Ratings, ICRA Limited.

In addition, supply-chain challenges being faced by airlines, which include the availability of spare parts and engine issues have recently plagued the sector, resulting in the grounding of certain aircraft for some airlines, thus impacting their overall capacities. This also negatively impacts the cash flow generation of the airlines.

Soon after the soaring air fares, aviation ministry asked airlines to keep airfares under control, and some carriers have now increased capacity on popular Go First routes to meet seasonal demand. Air India and IndiGo, have now increased frequency of flights from Delhi to Leh, Srinagar, and Pune, and IndiGo  has increased capacity from Mumbai to Leh, Srinagar, and Dehradun for the next few months.

The government has also asked aircraft manufacturers like Airbus and Boeing to supply planes to their Indian customers as soon as possible because here we have demand but no capacity, he added. The big issue now is that there are too few seats chasing too many people who want to be in them.

This surge in domestic airfares is also resulting in international short hauls becoming more attractive in the summer holiday season for travellers.

ACI believes  these sky-high airfares are threatening air travel's recovery.

"“A supply-demand imbalance should not be exploited by airlines at the expense of customers by restricting the capacity, especially international one which is a key driver of social and economic growth and a major source of revenues for the airport sector," it said.

Is there a way to beat these soaring air fares?

Airlines use advanced computer and pricing algorithms to determine prices and run sales based on the time of the year, passenger demand, weather, major events/festivals, time of day, competitor prices, fuel prices, etc.

How are tickets priced?

When travel demand is low, prices are low and when demand is high, prices are high to capitalise on the interest.

To do this, airlines set up a pricing schedule for their flights, putting the seats into price ‘buckets,’ and as one ‘bucket’ fills up, they open the next, more expensive one up for purchase.

“Airline pricing models are complex, with tickets kept priced low enough so passengers can afford them, while keeping airlines profitable. Airlines use complicated algorithms to set their pricing, which weigh up determining factors including the nature of the airline (e.g., is it a low-cost carrier or premium airline), the itinerary, and the cabin class. These all have a bearing on how much the traveller pays for the ticket. However, there is one factor which outweighs all of these and is the ultimate determinator for the price paid: demand.," said Hugh Aitken, VP Flights at Skyscanner.

Avoid travel during blackout days: The travel industry has blackout days like Holi, Diwali, Christmas, New Year, school holiday season etc. . Avoid travel during these days as fares would be higher. Search for alternative dates that are not peak season so that you can capitalize on off-season low fares. The more rigid your plans, the less likely it will be that you find a deal. If you must travel in the summer season, data analysed by Google Flight suggests  for domestic trips prices have been lower 14-44 days before departure, and the lowest average prices are usually 21 days out.

Fly mid-week: If you want to find a cheaper flight, consider flying in the middle of the week instead of the weekend. Early morning and late-night flights are also cheaper. Fridays and Mondays are the busiest days for business travel so avoid those days too if you’re looking for a cheaper flight. Data analysed by Google Flights shows that on average, flights that depart on Monday, Tuesday, or Wednesday have been 12% cheaper than weekend departures. 

You should also try out different search engines and ticket booking portals: For example, ticket prices may differ on MakeMyTrip and Yatra based on their offers and the payment choice. You must also check out the ticket price on the airline's website for comparisons.

Go incognito: The booking websites and engines store the previous search history and cookies from your browser to increase the airfare of a repeatedly searched route. If you search a particular route time and again, the websites manipulate you into thinking that the price would rise further and, thus, booking the ticket then and thereby increasing the price. You can avoid this by using the incognito mode of your browser.

Always look for the airline's frequent flyer program if you are a loyal customer with a particular airline:  Through such programs, you can earn certain points or miles on your flight. You can use those on your next flight to make it cheaper. These days, airlines also give points or discounts on particular credit or debit cards. EEach card has its own system of awarding miles every time you use the card. Some credit cards offer air miles in place of reward points whereas others allow you to convert reward points to air miles.

Social media: Follow airlines on social media to avail their promotional deals and discounts throughout the year. You can even subscribe to the airlines, to get notification of flash sales and special air discounts.

Set tracker alerts: You can also use trackers to set alerts whenever air ticket prices fall below average. You can also use these tools to search for flight ticket prices across multiple brands, airlines, dates and locations on just one platform.

Try the whole month search tool: "The ‘whole month’ search tool allows you to see cheap flights immediately and pick the right deal for you. Consider travelling a day before or a day after your original departure dates, as flying on less popular days of the week is always cheaper," said Naomi Hahn, Skyscanner’s VP of Strategy.

Mix and match your airline: Don't always book a roundtrip with the same airline. Try and mix-and-match the airlines. Look at flying out with one airline and back with another.

Use the calendar view, date grid and price graph to see how fares change: On Google Flights, calendar view and date grid lets you see how much you can save if you’re flexible on your departure and return dates. The price graph shows you what prices look like for an ‘X day’ long trip, depending on the departure date.