Thursday, January 03, 2019

Airlines' 8% fare hike comes a cropper as Indians refuse to pay more to fly

In October, worried over the red marks in airline balance sheets, top officials of the government summoned airline bosses. Junk the price war and make some money, was the advice given. It was a rare demand from the government, which has portrayed exponential growth in air passengers as an achievement.
“Excessive competition has led to decline in tariffs (rates), affecting GST (goods and services tax) collections from the telecom and airline industries,” Finance Minister Arun Jaitley said in a recent interview.
The airlines did try. Faced with fuel prices creeping up, they thought festival time was the ideal moment when they could earn some more — they raised fares by around eight per cent.
They have been proved wrong. The data suggests Indian flyers are now used to a low-fare environment. Passenger traffic numbers show their growth has come at the expense of unrealistically low yields. Airlines' worry is that even on routes where there are people with high disposable incomes, the only way to generate enough demand seems to be to cut prices.
Data from the Directorate General of Civil Aviation (DGCA) shows the number of passengers fell on 12 of the top 15 routes in the peak traffic season of November. When compared with October, passenger growth decelerated by almost eight per cent on Mumbai-Delhi, by 14 per cent on Mumbai-Chennai and by 15 per cent on Mumbai-Hyderabad.
03/01/19 Arindam Majumder/Business Standard