Why airlines are raising fares even in the lean season
NEW DELHI: Airlines have raised airfares on all key routes even in the ongoing lean travel season, because of strong demand, high seat occupancy and rising jet fuel prices, a trend that is likely to accentuate over the peak summer travel months, according to airline executives and analysts.
This is a departure from the earlier practice of reducing airfares drastically from January 10 onwards after the end of the peak Christmas and New Year season.
“Fares for bookings within the next two weeks have risen on all the key routes. It is likely that all the sales run in November and December for bookings in February and March have resulted in good loads (flight occupancy) for the airlines, which has resulted in fares being raised for the last fortnight,” said Yatra.com’s chief operating officer Sharat Dhall.
Dhall was referring to the demonetisation drive that started in November, forcing airlines to tempt more passengers into flying by offering early sales.
These sales typically announced around January 10 were brought forward to November and December for travel in the months of January, February and March. This meant many of the seats were already booked, giving room to airlines to offer the rest of the seats at a higher price, their typical business model.
There are two additional reasons, according to an airline executive who did not wished to be named, why airlines are offering steep last-minute fares. One, airlines reported strong double-digit growth in passenger numbers even in January, which reflects strong economic tail winds despite demonetisation. Two, airlines which follow each other during sales, have resisted flash sales for the immediate fortnight.
Partly, this has also to do with the realisation that fuel is now 50% more expensive than a year ago, said the executive. Fuel constitutes nearly half the cost of the airlines and in a way decides whether an airlines logs profit or loss, the executive said.
The combined profit of SpiceJet, IndiGo and Jet Airways fell 69% in the quarter ended December from a year earlier.
Air India, Jet Airways, IndiGo, SpiceJet, GoAir Vistara AirAsia India did not reply to an email seeking comments.
Airlines are incentivising passengers to book early, as fares for those planning to book two weeks in advance are cheaper. For instance, one-way Delhi-Mumbai economy tickets are selling for nearly ₹7,000 at present. But the same Delhi-Mumbai one-way economy ticket costs just ₹2,000 if booked in advance.