Sunday, November 27, 2022

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Flight fares unlikely to fall back to pre-Covid levels due to rising fuel costs

Flight Ticket Prices: As airlines battle rising fuel and labour expenses, domestic airfares are unlikely to return to pre-COVID levels anytime soon, according to airline executives.

“Pre-COVID airfares in India were unsustainable. Only one airline was reporting a profit back then, at a time when jet fuel prices were half compared to current levels,” a senior airline executive said.

“Even now, despite high demand, airlines are reporting high losses. This indicates airfares needed to rise in India,” the executive added.

The same person went on to say that most airlines are not in the mood to start a fare war at this time, when international supply chains are interrupted and gasoline prices are still quite high following the Russian invasion of Ukraine.

“It’s unusual. You have demand quickly outstripping supply in India. I think we might a couple of months where demand and supply may not be aligned,” another senior executive, from IndiGo, told Moneycontrol.

Flight Ticket Prices

The CEO went on to say that although airfares are unlikely to decrease any time soon, they might partially increase if petroleum prices continue to rise and the world economy continues to worsen.

“Pilot shortages, aircraft delivery shortages from both Boeing and Airbus, Air Traffic Control saturation and airport infrastructure constraints around the world are all real, and they are constraints that will take years to resolve,” a senior executive at another domestic carrier added.

In a similar vein, a GoFirst official claimed that although travel demand had recovered to pre-COVID levels in India, poor capacity and high fuel prices would likely prevent rates from reaching pre-COVID levels anytime soon.

“Supply chains issues are expected to improve in the next six months, but it has impacted the capacity addition plans of Indian aviation for the next two years,” the GoFirst official said.

The grounding of more than 75 aircraft, or about 10–12 percent of the fleet, creates difficulties for Indian carriers in an already unfavourable cost climate.

According to CAPA, significant supply chain concerns have reduced airline capacity and could become more widespread in the upcoming fiscal year beginning in April 2023. Future deliveries of aircraft will be impacted by this as well as those that are currently being delivered.

Additionally, CAPA India has increased its predictions of the losses Indian carriers will incur in the fiscal year 2023 from $1.4-1.7 billion to approximately $2.5 billion. According to the consultancy group, the situation will remain difficult since geopolitical forces are influencing fuel prices and disrupting the supply chain.

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