Wednesday, September 06, 2023

Analysis: Jet Fuel Prices Hiked, Airfares To Go Up Again This Festive Season

The triple whammy of increasing jet fuel prices, Go First filing for insolvency and the seat capacity of airlines remaining low is all set to hurt the wallets of flyers again this festival season.

The government increased jet fuel prices by 14% on September 1 and the cost has surged 26% in the past three months. Airlines ascribe 40% of their operating expenses to jet fuel and, experts say, the hike will play a role in pushing up airfares during the Navratri and Diwali season this year.

According to a study conducted by Airports Council International, India has witnessed the biggest jump in airfares in Asia Pacific between the fourth quarter of 2019 and the fourth quarter of 2022. India saw the highest increase of 41%, followed by the UAE at 34%, Singapore at 30% and Australia at 23%.

Last August, the government lifted the cap on domestic airfare prices that it had imposed during two years of Covid. This gave airlines the freedom to set their own fares, and the need to make up for the loss incurred during the pandemic has ensured that passengers have had to pay more to fly.

India's domestic air passenger traffic volume went up by 25% year-on-year to 1.21 crore passengers in July 2023, as per data released by the Directorate General of Civil Aviation (DGCA) recently.

Travel demand has gone up but the seat capacity is still down. Airlines submit their flight plans (number of seats and sectors they will operate) to the DGCA every year, which gives its approval accordingly. The carriers have not, however, been able to operate the number of flights that they promised in their plans submitted to the regulator.

"Why does the DGCA allow airlines to decide how many flights they will operate? The airlines must be obligated to operate the number of flights that they promise in the flight plan to the DGCA. If the demand is more, the number of seats available is less, the fares go up and the passengers suffer on two counts," said Jitender Bhargava, former executive director, Air India.

"Firstly, demand is more, capacity is less and the airlines record 90%-plus load factor. So, the occupancy of a flight is far more than usual. Secondly, the higher the load factor, the higher the fare is," he added.

06/09/2023 Bharti Mishra Nath/NDTV

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