Flying Gets Affordable Once Again as Airlines Cut Fares

If you had given up flying after the surge in air fares, it’s time you had a rethink. A Mumbai-Delhi-Mumbai flight now costs almost half of what it did a few months ago. And the good news is that the fare cuts are not restricted to the main routes.

Over the last few weeks, airlines have quietly cut their fares. This has been attributed to the sharp drop in the price of aviation turbine fuel. ATF accounts for as much as 45 percent of an airline’s costs, and its price has declined by about 60 percent since last September to Rs 31,176 per kilolitre. Today, the price of ATF is down to what it was in July 2005.

The fare cuts could make a big difference for passengers. If you are looking to fly from Mumbai to Delhi this Friday and get back on Monday morning, you would pay just over Rs 4,500 for the ticket as against at least Rs 8,000 not too long ago - a fall that’s over 40 percent.

And it’s not as if the story is restricted to flights between high-traffic destinations. A round trip between Mumbai and Bhubaneswar that cost as much as Rs 8,500 is now down to a more affordable Rs 5,600.

Airlines have had little choice but to cut fares despite their numbers being under pressure as they need to get more people flying again. With most airlines reporting operating losses along with unused inventory, it makes sense to discount to a certain extent to fill capacity, Deep Kalra, CEO and founder, makemytrip.com, says.

Historically, it paid to book tickets in advance. That is the case this time round as well. A round trip between Delhi and Bangalore one of the busiest routes in the country could cost the traveller less than Rs 5,000 if booked now for the weekend beginning March 6. On the contrary, the corresponding fare to fly during the ensuing weekend is about Rs 1,500 more. The advance purchase fare is a win-win offer for both business and leisure travellers, says Sanjay Aggarwal, CEO, SpiceJet.

The drop in fares is not restricted to just domestic flights. Carriers like Air India and Singapore Airlines have also announced significant cuts. Airlines need to stimulate the market as load factors are falling since August despite a contraction in fares. Aggressive pricing is one way to achieve that, but it may impact them in the long run, Mark Martin, senior advisor, KPMG, says.

We cut fares by more than 50 percent in the last two months as ATF prices came down drastically. This will increase passenger traffic in the coming months, Air India’s spokesperson J Bhargava said. Likewise, Singapore Airlines has slashed economy-class fares by 52 percent to Singapore and other Southeast Asian destinations from India.

The question is how long can airlines sustain these fares. The drop in airfares was a reactionary gambit from airlines following the decline in ATF prices. It does not appear to be a part of a long-term strategy, thinks makemytrip.com’s Mr Kalra.