Soaring airfares

Airfare has always been a function of demand and supply. So, given the rush of bookings and pent-up demand, a surge in prices was on expected lines after the reopening of regular international flights following a two-year hiatus. The skyrocketing ticket prices though are inexplicable, despite the narrative that jet fuel prices, high demand and pilot shortage are all conspiring to drive airfares up globally. Even the travel truism of booking as early as possible for affordable airfare is being turned on its head as profitability emerges as the key determinant for carriers. If there are any cheap tickets available, these are few and far between. Surveys by travel portals suggest a huge spike in people wanting to travel, but the airfares are proving to be a dampener on the positive consumer sentiment reflected in flight-related searches.

Soaring airfare, being blamed on high aviation turbine fuel (ATF) prices aggravated by geopolitical issues, is the new normal on the domestic circuit, too, and could upset projections of air traffic recovery to pre-pandemic levels by the fourth quarter of 2022-23. Any relief on lowering of prices looks unlikely as ATF accounts for 30-40 per cent of an airline’s cost structure and resisting an increase in prices would be difficult, especially considering the huge losses suffered during the pandemic.

Incidentally, the brutally competitive Indian aviation sector faces criticism by industry observers for misplaced bravado in keeping fares low despite high taxes and fuel prices. Indian airlines face a record loss of more than Rs 20,000 crore, and there are no easy solutions. The country’s largest airline, IndiGo, wants ATF to be brought under the Goods and Services Tax (GST) for the benefit of airlines and customers, contending that rationalising taxes will result in high growth for the sector. A government-industry interface on pricing should not be delayed. A good deal for the traveller makes good business sense.