Logistics

Airfares to fly high this summer

Forum Gandhi Mumbai | Updated on April 01, 2019 Published on April 01, 2019

Despite likely let-up in supply-side issues, higher demand may push up ticket prices

With the aviation industry hitting a financial airpocket, flyers may have to pay more throughout this summer, experts tracking the sector say.

Though recent reports suggest that some issues related to the supply side may be resolved, analysts believe that airfares are likely to stay at an elevated level during the summer quarter due to slow recovery from the previous quarters.

Jet Airways is likely to get back 80 per cent of its grounded fleet by April-end, and Spicejet will be inducting other aircraft in its fleet instead of the 12 grounded Boeing 737 Max.

The opening of the Mumbai airport runway is scheduled for the end of the month.

While these events will help ease supply issues, experts said that rising demand will keep tariffs on the higher side.

According to a CRISIL Research report, airfares had risen 10-12 per cent in the just ended quarter compared to the same period last year.

Hetal Gandhi, Director, CRISIL Research, said: “During Q1 of FY2020, we expect the fares to remain elevated due to the upcoming demand on account of summer holidays. However, the increase is not expected to be as steep as it was observed in Q4 FY19, as Jet Airways would be operating its grounded aircraft from Q1 FY20, led by board approval for the restructuring plan.”

“Going forward, resolution of safety issues of Boeing 737 Max 8 aircraft will be a key monitorable,” Gandhi added.

Cancellation rate to dip

Flight cancellation rate for the industry inched up to about 1.9 per cent in February, compared with 0.9 per cent during the same period last year.

Going forward, the cancellation rates are expected to gradually return to earlier levels.

However, higher ticket fares on account of demand growth and slower capacity addition will impact potential flyers.

“The same has already been witnessed in January 2019, when the domestic passenger growth dipped to 9 per cent, an effect of the rising fares since Q3 FY19,” Kinjal Shah, vice-president and co-head (corporate sector ratings) at ICRA said.

Sharat Dhall, COO, Yatra.com, said that booking flights in advance could help.

“Booking it (airfare) in advance helps passengers, as the real price increase comes at the last minute. People usually book their tickets within 15-30 days of travel. However, 15-20 per cent of people book their ticket 30-40 days more in advance,” said Dhall.

Anshul Sethi,vice-president and head, supplier relations at Thomas Cook, said this year, airlines’ “sale” came in a couple of months later than expected, due to which there has been a change in the booking pattern.

Published on April 01, 2019
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