Domestic flights rise, but fares don't make airlines money

New Delhi: Indian carriers are flying more people across the country, but the increased domestic activity doesn’t seem to be making too much money yet for them. Data of average fares on key routes during November and December last year show that the airlines have seen a decline in fares. Some routes have registered an increase in fares, but the number of such routes is fewer. The decline in fares in December is not just on key routes but also on routes connecting smaller towns that are growing at a higher rate post-Covid, show the data compiled by Caladrius Aero Consulting LLP, an aviation consultancy firm.

Industry insiders say that the decline in trend over December is visible during the early days of January also. “The overall data on the domestic market for January 2021show an average decrease of 28% in the passenger fares. This trend is in line with historic fluctuation as December fares are higher due to the holiday season.

Among the traffic corridors analysed, the east-west corridor for domestic traffic yields a 12% advantage over the north-south corridor,” said Rohit Tomar, managing partner at Caladrius Aero Consulting LLP, an aviation consultancy firm. Tomar, however, adds that capacity restrictions in the domestic market are proving to be an opportunity for airlines to recoup better yields, as fares in January are better than previous years. The reason for higher fares this year over previous years could be due to the government’s decision to put a lower and higher cap on fares.

Industry watchers say fares are set to be affected if there is an increase in capacity. “Fares are the result of demand and supply balance. Capacity or supply increased in December. Perhaps on some routes demand was not enough for the new capacity, leading to fares declining. Fares are the highest when demand exceeds supply,” said Sanjiv Kapoor, former chief operating officer and CSCO at SpiceJet and Vistara. India, which had banned all flight operations starting March-end and restarted operations during the end of May, started registering a huge growth in passengers starting October with the festive months of Durga Puja and Diwali.

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Indian airlines are currently allowed to operate about 80% of pre-Covid flight levels — of about 2,500 flights per day — as part of its strategy to gradually open up the domestic aviation market. Moving toward normalcy, airlines are continuously adding flights and operated 2,172 flights on Thursday and carried 2,21,340 passengers.


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