Supply disruptions, strong demand to keep airfares sky-high

Brace yourself for higher airfares.

A perfect storm of supply constraints, high jet fuel prices and a rebound in travel demand could push up airfares further in India, many aviation industry insiders and observers told DH.

“Air travel operations are going through a strong period of recovery and demand continues to rise in the upcoming winter season,” said Indigo’s Network Planning Head, Abhijit Dasgupta.

The post-pandemic rise in demand comes at a time when many airlines from market leader IndiGo to budget airline Go First (founded as GoAir) are unable to operate at full capacity due to supply chain disruptions.

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“GoAir is going to fly at 50% of its capacity for the winter schedule (which is the peak time when everyone makes their money),” an aviation analyst confirmed, explaining how supply chain disruptions in China delayed the delivery of parts such as the Pratt & Whitney engines, which power the Airbus A320 NEO planes operated by many budget carriers.

“There is high overseas supplier dependency for aircraft parts, maintenance, and software,” said Alok Anand of Acumen Aviation.

IndiGo has also grounded 30 planes due to supply chain disruptions.

“The drop in airline capacity due to the ongoing supply chain disruption, especially at a time when the demand is on an upswing, has also contributed to the rising airfares currently,” a Vistara spokesperson said.

That coupled with the expected consolidation in the industry could make airfares skyrocket this winter.

The higher fares will bring more pain to consumers, who have already been paying more to fly since India’s aviation regulator DGCA removed a cap on airfares on August 31. The DGCA and the Ministry of Civil Aviation declined to comment.

“Post the removal of airfare caps, average airfares have risen by almost 30-35% due to high travel demand in the last two months,” said Aloke Bajpai, co-founder & group CEO of online travel portal AI-based ixigo.

The steep rise in airfares have forced many people to opt for longer journeys by rail and road.

The higher ticket prices will, however, help airline operators protect some of their profit margins as they cope with higher costs tied to acquiring or leasing aircraft, using airport facilities, training pilots and transporting aircraft parts.

Technology has changed much of airfare pricing and the use of Artificial Intelligence has given way to a ‘dynamic pricing’ mechanism, reflecting changing market demand for seats subject to the routes.

“All pricing is based on how desperately you want that seat,” an aviation analyst said on condition of anonymity.

Customers agreed.

“I recently booked a flight from Jaipur to Bangalore for Rs 10,000. That was also a lucky day for me. The previous day, the same ticket was for 19,000, but when I checked at midnight it dropped down to 10,000 and I immediately booked it. The next day, the fare again rose up to Rs 19,000,” said Saurabh Soni, who works as design head in Bengaluru.

“Airlines use Computerised Yield Management Systems, which produce prices for various routes based on personalised data, which can now be captured by cookies on the airline websites to optimise their business strategy,” said Pavan Kumar, a Hyderabad-based independent researcher.