Air traffic

High airfares hurt domestic air traffic

NEW DELHI : Domestic air passenger traffic decreased by 4.58% from 2,317,915 from March 1 to March 7 to 2,211,838 in the week ending April 7, indicating that high air fares, among other factors, may have affected demand, according to aviation analytics website NetworkThoughts.

Air passenger traffic, which has seen a V-shaped recovery in recent months, had only declined during outbreaks of new waves of the covid-19 pandemic.

The 2% more flights deployed by airlines during the period also put pressure on airline load factors, according to data from NetworkThoughts.

“Traffic has not increased as expected even after the restrictions were lifted. The reason would be a mix of exam season and high ticket prices,” said Ameya Joshi, independent aviation analyst and founder of NetworkThoughts. .

“Added to this are a few airfields undergoing modernization, thus limiting opening hours and resulting in reduced air traffic and passenger movements,” Joshi said. Air fares are up more than 60% year-on-year on popular routes, mainly due to a rise in the price of aviation turbine fuel (ATF), according to data from the UK travel portal. ixigo line.

“Although there has been an increase in travel search queries due to pent-up demand, bookings are still not increasing based on searches due to high airfares,” according to Aloke Bajpai, co-founder and group general manager. , ixigo.

However, business and business travel is picking up again, Bajpai said. “With most organizations implementing hybrid work models and virtual events returning to physical mode, the demand for work-related travel is steadily increasing,” he said.

The price of ATF, which is updated fortnightly, hit a record high on April 1 due to rising crude oil prices. The price of ATF rose 20.74% on April 1 from a month ago for 1,12,924.83 per kiloliter in Delhi, while in Kolkata, Mumbai and Chennai it was 1,17,353.71, 1,11,690.61, and 116,583.71 per kilolitre, respectively. ATF accounts for 30-40% of an airline’s cost structure in India and price increases are likely to squeeze the profit margins of airlines, which have suffered huge losses in recent quarters due to the pandemic.

Domestic air passenger traffic is expected to be around 84 million in FY22, about 59% higher than the previous year and 40% lower than pre-covid levels, the agency said. Icra Ltd rating in a report released earlier this week.

“ATF prices jumped around 93% on an annual basis in April 2022, given high crude oil prices, due to geopolitical problems resulting from the Russian invasion of Ukraine,” the report said. ICRA report.

“High ATF prices, compounded by geopolitical issues, will remain a near-term challenge for the industry and will be a key determinant of industry profitability,” he added.

Meanwhile, airlines have little choice but to pass on rising costs to customers. “It’s a delicate balance between passing costs on to customers and maintaining demand. However, most airlines are unable to absorb the high costs resulting from rising oil prices,” a senior airline official said, speaking on condition of anonymity.

Last month, Ronojoy Dutta, chief executive of India’s biggest airline IndiGo, urged the central government to subject the ATF to goods and services tax (GST) for the benefit of airlines and customers. Streamlining taxes will result in strong growth for the sector, creating a multiplier effect across the economy, promoting trade, tourism and job creation, Dutta argued.

Indian airlines could post a record loss of more than 20,000 crore in FY22, 44% higher than the loss reported the previous year, according to a report by ratings agency Crisil Ltd. It expects domestic air traffic to return to pre-pandemic levels by the fourth quarter of 2022-23.

Spokespersons for major airlines did not comment on high airfares and their impact on demand.

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