Will good times continue for the Indian flier?

Anand Kalyanaraman | Updated on January 20, 2018


That the Indian flier is price-conscious is clear from the rapid growth of low cost carriers (LCCs) in the domestic skies. Over the years, LCCs such as IndiGo Airlines, SpiceJet and GoAir gained market share rapidly at the expense of the full service carriers (FSCs) — more than 60 per cent of passengers in the country now fly with LCCs. Also, except Vistara, the new carriers in the Indian skies are all LCCs. Why, even the FSCs such as Jet Airways and Air India often price their economy class tickets around levels similar to those of LCCs. Low fares have invariably attracted the Indian flier, a case in point being the ongoing rapid growth in passenger traffic.

Wooing the passenger

Data from the listed airlines — Jet Airways, SpiceJet and IndiGo — shows that ticket fares came down quite a bit last year. For the nine months ending December 2015, the average fare on these airlines fell about 8-14 per cent year-on-year. This is despite the carriers retaining a good part of their fuel cost cut benefit. Many airlines, especially LCCs, have been coming up with flash sales. If you are lucky to get these limited tickets, you could fly quite cheap.

Besides, carriers have been introducing special schemes to attract fliers. Not surprising, given the increasing competition; 10 airlines (5 old and 5 new) now jostle for passenger patronage. Jet Airways, for instance, lets you lock in rates for 72 hours, giving time to finalise travel plans. This flexibility costs ₹350 on domestic flights and ₹700 on international ones. IndiGo lets you cancel or change your booking any number of times, select a seat, and get a meal for an extra ₹1,500. SpiceJet, for ₹299, guarantees you a flight in 24 hours in case of delays, cancellations or missed flights.

Some airlines offer discounts to customers who book tickets on their mobile platforms and apps. Airlines have also been using ‘fare unbundling’ to good effect to let passengers pick and choose services they want. For instance, SpiceJet charges a couple of hundreds less if you travel without check-in baggage. The draft civil aviation policy seeks to enhance the speed of passenger processing and grievance handling at airports. The proposal to liberalise bilateral traffic rights could also provide wider choice for passengers in their international travel.

All’s not well

Not all is hunky-dory though. Airlines have raised rescheduling and cancellation charges significantly over the past two years — it could now add up to almost ₹2,500 per change. The aviation regulator DGCA is reported to be looking into the steep charges, but nothing has come of it so far. Besides, the practice by airlines of levying ‘convenience fee’ of a few hundreds for booking tickets has been a sore point. Passenger associations have often accused airlines of operating as cartels. The draft aviation policy proposes giving airlines the freedom to charge any amount for additional services. This could work against the flier.

Also, a few recent developments could upset the cheap fare applecart. Crude oil price has risen over the past few months. Besides, the recent Budget increased excise duty on ATF from 8 per cent to 14 per cent. Ergo: ATF price has been on the rise since February, though it is still cheaper than a year ago. Airlines have accused the oil companies of acting as a cartel and fixing ATF prices in an opaque manner. If airlines pass on the higher cost to passengers, tickets will cost more. Fares may also head north if crude oil price continues to rise. A sharp increase, though, seems unlikely, given the global demand-supply conditions.

Published on April 17, 2016

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