Monday, November 04, 2019

Airfares on India’s busiest airline routes have dropped to new lows, beating even UDAN rates

When IndiGo announced its Q2-FY20 results last week, it warned of sustained weakness in the market after the unusual fares in the strong month of October. The second quarter has long been traditionally weak and while airlines have reported profits in this period of the year in the past, those occasions were when capacity was much lower and so were the oil prices.

Last year, Jet Airways and IndiGo reported bumper losses in Q2 which set in motion the fall of Jet Airways – with the airline suspending operations in April this year. This led to a frenzy of activities by airlines to get slots which were suddenly available, especially at Mumbai and Delhi. In this melee, Spicejet and Vistara doubled their departures at Mumbai – the most congested airport in the country.

While data for September is not yet released by the regulator, the domestic departures for August 2019 are up 0.4 percent over the same month last year. The capacity is back but it hasn’t grown, which is also reflecting the near-flat growth in passenger traffic.

However, this has led to one surprising factor – airfares which are touching new lows! In fact, ticket prices are so low than on certain sectors like Delhi–Lucknow, they are lower than fares on Regional Connectivity Scheme (RCS) – UDAN (Ude Desh ka Aam Nagrik) routes of similar stage length and duration! The RCS-UDAN fares are subsidised and capped while the fares on all other routes are dynamic and largely driven by demand and capacity.

While there was a huge hue and cry over lower fares during Diwali days, traditionally the fares have been high only on the days leading up to Diwali and then post the festivities are over. The days of festivities sees lesser travel. The VFR (visiting friends and relatives) traffic travels before Diwali and returns post Diwali, whereas the holiday crowd leaves post Diwali to return about a week later.

Airfares also tend to be higher on Monday morning and Friday evenings – especially between the metro routes but a quick look at fares on the various portals shows that even those are very low post Diwali. A Monday morning flight between Mumbai and Delhi was selling at less than Rs 3,000. Likewise, the cheapest flights between major metro cities were selling for less than Rs 4,000 for most days.
04/11/19 Ameya Joshi/CNBC TV18
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