Indians bemoan rising fares of low-cost carriers

Price-sensitive passengers in India are now hard-pressed to find the low-cost flights they had become used to in the past decade, as fares have surged by 30 per cent to 50 per cent to their highest since the Covid-19 pandemic began.

Accountant Venkatesh Deshmukh, 39, in Delhi, said he paid "a painful amount" to take his family to his home town, Mumbai, during the summer holidays in May on a budget airline.

"It used to cost 6,000 rupees (S$106) per ticket but now it costs almost 9,000 rupees," he said. A one-way ticket on a non-budget carrier between Mumbai and Delhi can cost about 10,000 rupees.

India is dominated by low-cost carriers, which cover over 80 per cent of the domestic market.

Booking website ixigo said domestic fares are now 30 per cent to 35 per cent higher than they were in January and February. "Fares right now are the highest we have seen on the domestic side post-Covid-19," said Mr Aloke Bajpai, group chief executive and co-founder of ixigo.

International airfares, meanwhile, have risen by 45 per cent to 50 per cent on some popular routes this year, according to ixigo. Other booking portals - MakeMyTrip, Cleartrip, Skyscanner and Kayak - showed a similar trend for outbound flights.

One-way fares for popular routes like Mumbai-New York in May this year were between 65,000 and 70,000 rupees. In May 2019, travellers paid half of that. Last month's fares were close to 80,000 rupees.

The price increase is driven by record-high jet fuel prices, which have risen by more than 55 per cent globally since January.

"Given the constant increases in crude oil prices (last by 16.3 per cent) and depreciation in the rupee, we believe that the situation is impacting the aviation sector unfavourably as (fuel) constitutes almost half of any airline's operational costs," said Mr Ronojoy Dutta, chief executive of India's most popular airline, IndiGo.

Mr Deepak Rajawat, chief commercial officer of full-service airline Vistara, said that besides fuel prices, airfares were rising because leisure travel had significantly surged while airline capacity is still below pre-Covid-19 levels.

But despite more expensive air tickets, bookings are going strong. Some observers, like Mr Ameya Joshi, founder of aviation analysis website Network Thoughts, attribute this to pent-up demand or "revenge tourism".

Ixigo found that domestic travel for the April to June period had recovered to 83 per cent and international flights to 70 per cent capacity of pre-pandemic levels.

As most countries now accept double-vaccination certificates and do not require Covid-19 tests, travellers are packing their bags.

A spokesman for Singapore Airlines said it is back to almost 75 per cent of its pre-pandemic seat capacity for flights to and out of India.

While consumers like Mr Deshmukh fear that high airfares are here to stay, aviation industry observers said that when jet fuel prices dip, so will fares.

Upcoming launches of airlines, including the budget Akasa Air and the relaunch of the largely full-service Jet Airways, will also create "capacity pressure, leading to lower fares", said Mr Joshi.

Mr Vinamra Longani, head of operations at Sarin & Co, a law firm specialising in aircraft finance, said that low-cost airlines in India operate from the same airports, pay similar aircraft lease rentals and have similar human resource costs as full-service airlines.

"Where they differ is they unbundle services - offering meals, extra-legroom seats, priority boarding, et cetera, for an additional cost. Thus, despite the high fuel prices, low-cost airlines will almost always be very competitively priced."