Thursday, June 07, 2018

Lean season set to cool airfares despite fuel price pinch

When aviation market leader IndiGo announced hike in airfares last week on spike in fuel prices, it seemed the time for low fares was over.

However, just in a week other airlines have started offering deep discounts on advance booking as lean season and increase in seat capacity loomed.

Wadia Group-owned GoAir has announced its ‘Monsoon sale’ for fares starting as low as Rs 1,299. AirAsia with its ‘early monsoon sale’ is offering fares starting at Rs 1,399. Vistara, a joint venture of Tata Group and Singapore airlines, too on Tuesday announced a 24-hour only ‘early monsoon’ flash sale with fares starting from Rs 1,599. Not to be left behind, Jet Airways, which will commence operations under regional connectivity scheme (RCS) from next week on select routes, has announced fares starting as low as Rs 967 under a scheme.

According to Subhash Goyal, chairman of STIC Travel Group and president of Indian Association of Tour Operators (IATO), the competition will not let the fares surge with lean season just around the corner and more seats being available in coming months due to addition of aircraft in the fleet of most of the airlines. As per the seasonal trend, fares are expected to rise only by end of September, as the peak season starts.

As per the data available with state-owned oil companies, aviation turbine fuel (ATF) price was raised by 7.17% on Monday. The price was raised 6.3% last month to their highest level since May 2014.

Fuel constitutes around 40% of the airline’s running costs. The hike in fuel prices are hitting the bottomlines of the airline companies.

IndiGo and Jet Airways, for example, had a difficult March quarter, as rising fuel prices ate into their yields. IndiGo reported 73% decline in its profit.

Jet Airways, on the other hand, recorded a net loss of Rs 1,045 crore in the last quarter compared to a net profit of Rs 601.71 crore in the corresponding period last year.

“It is getting difficult with each passing day to keep the cost structure down,” said an executive with a full-service carrier.
At a global level, concerned over the rising fuel prices, International Air Transport Association (IATA), a group of 280 airlines comprising 83% of global air traffic, downgraded its 2018 profit forecast for the airline industry, projecting airlines will collectively earn $33.8 billion this year down by about 12% from the $38.4 billion which was predicted in December 2017.
07/06/18 Shahkar Abidi/DNA