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.

TravTalk - India - - QUICKBYTES - HAZEL JAIN

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

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