Should we brace for an airfare hike?
The industry is waiting and watching for a possible spike in domestic airfares this festive season after Indian Oil Corporation hiked ATF prices by 4 per cent with effect from September 1.
Airfares in the Indian domestic sector have been declining over the last two to three years. Airlines have come out with flash sales to outdo competition as they have more than adequate capacity. A slight increase in airfares will not deter travel plans of most people. Secondly, capacity on most domestic sectors is also increasing, thereby putting pressure on airlines to hold on to the fares and not raise it.
I do not see this possible increase in domestic airfare this festival season to affect corporate travel or FIT, but it would definitely impact the MICE sector as they are on a budget. The airfare component plays a major part in the complete package and also in the decision making process of choosing a destination. Any increase in the airfare component will definitely affect the MICE business as clients would like to choose destinations with cheaper air tickets.
A hike in aviation turbine fuel will increase the cost and fares of airlines for the uncoming festivals of Dussera and Diwali. Currently, with the impact of Goods and Services Tax (GST), most companies are feeling the impact of low volumes due to the rollover. The anticipated airfare hike is likely to impact MICE, travel, and corporate budget and definitely delay travel plans for MICE as it would impact their entire packages.
There will be an initial reaction by the corporates but eventually it will be accepted. There will be no major impact on travel plans whether it is corporates or MICE. This increase and decrease in ATF prices is normally due to the global economy on oil prices. However, even in the past when the price of an oil barrel was brought down, airlines did not show an immediate and a corresponding decrease in the ATF pricing. We hope our government will be responsible enough to monitor and control this price increase.
With ATF hike by 4 per cent an immediate hike in flight ticket prices is expected to affect the festive season of September through November which might be a mood spoiler as people already have a budget in plan. MICE has already been effected due to GST norms and every new increase in tax or ATF prices is again a challenge for us to sustain the regular business. Due to this hike, it will definitely affect air traffic.
Fuel prices have been deregulated. A four per cent hike in fuel price will not have a major impact on corporate travel. It may have some impact on FIT and MICE as it’s a pricesensitive segment with budget caps. However, alternate destinations are chosen to fit in the requirement. Thus overall, this would more or less go un-noticed. Repeated increase may have an impact on corporate travel. Demonetisation and now GST has brought about a slowdown leading to a reduction in corporate travel. It is important that we see a positive trend in the economy so that the spends continue.
John Nair Head (Business Travel) Cox & Kings, India Travel Award winner
Pradip Lulla Chairman & Managing Director, Cupid Travels & Tours
Joe Rajan CEO & Managing Director, Harvey World Destinations
Rajat Bagaria Managing Director Shristi Tours & Travels
Marzban Antia Managing Director Avesta Travels
Director Iris Reps