As India's airline market transforms into a duopoly, ticket prices that have long known to be dirt-cheap are climbing. Airfares on India's busiest route, Mumbai-New Delhi, were 23% higher during January through August than 2022, according to Thomas Cook India and SOTC Travel.
India also saw the highest airfare surge - 41% - in the region in the first three months of this year compared with 2019, a study by Airports Council International Asia Pacific found.
The higher prices come at a time when two domestic carriers - IndiGo and Air India Ltd. - are set to control the bulk of one of the world's fastest-growing aviation markets, while most smaller rivals struggle to stay afloat in the notoriously competitive market.
IndiGo, India's biggest carrier with a market share of 63%, is poised to capture more passenger traffic with a record order of 500 Airbus SE. planes, due to join its fleet from 2030. Air India, the country's No. 2 airline, also made a giant aircraft deal. It will grow bigger with plans to subsume Vistara - currently co-owned by Tata Group and Singapore Airlines Ltd. - by next year, provided it clears antitrust concerns raised. Air India is also acquiring AirAsia's local unit and merging it with Air India Express.
While big airlines are going bigger, small ones are retreating. Go Airlines India Ltd. stopped flying in May after it went belly up, blaming failing RTX's Pratt & Whitney engines. Its revival is in limbo as it struggles to attract funding and hundreds of pilots leave the insolvent airline. No-frills SpiceJet Ltd. is also under pressure after reporting losses for the past five years.
"The aviation market in India is transitioning to a few large players," said Rajat Mahajan, a partner at Deloitte Consulting. "With this consolidation, a couple of airlines are projected to capture about 75% of the market. This leaves a mere 25% for other players, consequently leaving consumers with fewer choices and hence pricier tickets," said Mahajan, who is also the firm's travel and hospitality expert.
Rising airfares could threaten Indian Prime Minister Narendra Modi's goal for bringing air travel to the masses who are financially locked out of the country's booming aviation. Only a fragment of the world's most-populous nation can afford flights, while the majority relies on cheaper trains for long distance travel. Just 8.8% of the 1.4 billion population flew domestic airlines last year.
After a surge in prices during the summer, the government urged airlines to keep domestic airfares within reasonable levels, especially on routes that were operated by Go Air and saw the highest fare jump due to a "demand and supply imbalance."
31/08/2023 Bloomberg/NDTV
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