It is highly unlikely that air fares will come down any time soon

Operational challenges is what was cited by SpiceJet when 26-year-old Aishwarya and her marathon team, headed from Bengaluru to Mumbai, found themselves grounded as the crisis-hit carrier could not mount its scheduled flight. Running a marathon is no mean feat, but what Aishwarya and her team found out was that air travel was a bigger challenge.

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Telecom News

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Telecom News ‘Fare wars’ leading to ‘abnormal’ discounts had led them to book their tickets on low-cost carrier SpiceJet for Rs 5,000 per person round trip, but those tickets remained non-starters and when they tried to re-book themselves on another airline, spot tickets on the same sector were priced at an astronomical Rs 18,000 per person, one way.

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Fare wars have often led airlines to not being able to handle the increased traffic as passengers who had planned their travel around the holiday season find out.

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Travel major Thomas Cook says that there is an average spike of 30-35 per cent on immediate departures.

Telecom news “Air fares that had gone to astronomical levels are once again coming back to normal levels,” SpiceJet that posted losses for five straight quarters said in a statement while announcing normal operations after a brief grounding on December 17.

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“There has been a damage to cost structure of air fares. Slight delays by SpiceJet cause speculation and other operators charge premium to accommodate these customers,” marketing head of a travel portal said, pointing out at the consequence of the SpiceJet turbulence.

Increased air fares in recent times have also led to the blurring of the fine line between low-cost carrier and full service carrier. SpiceJet has cancelled over 1,861 flights in December alone that led to airfares going out of reach for the average flyer.

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Today India has about six million seats per month (two lakh seats per day on offer), according to leading travel portals. December 20 to January 7 is considered peak season in India. “Considering the load factors, the demand is expected to uptick into upwards of 90 per cent level,” Indiver Rastogi, Chief Operating Officer & Head - Corporate Travel at Thomas Cook told The Sunday Standard. A 80-90 per cent occupancy would translate into 4.8-5.4 million seats per month in this period, he points out.

“Even if there is a SpiceJet delay of 90 minutes, the average fare in other airlines goes up,” a marketing executive said.

Airlines are equipping themselves to meet the demands of passengers booking and re-booking during this season. According to the winter schedule (October 26 to March 28) data for the current fiscal, all scheduled operators will operate 12,305 flights compared to 11,886 in the year ago period.  Though most airlines have increased their flights, carriers like SpiceJet, Air India and Jet Airways have decreased their services this winter, which has also led to an increase in fares.

The entry of full service carrier Vistara in January 2015 may ease some pressure but the peak December season is likely to burden the customer. Sharat Dhall, President of travel portal Yatra.com, says, “Right now, it is the passengers who are the most inconvenienced as last-minute fares have skyrocketed, and as we get closer to Christmas and New Year’s break, we are likely to see fares soar even further.”

Reports say former SpiceJet promoter Ajay Singh along with two other investors is likely to infuse Rs 1,200 crore into the troubled carrier. Even if that happens, sector experts feel that it is highly unlikely that air fares will come down any time soon. This, they state, is due to the existing tax structure that makes it difficult for airlines to operate.

Analysts also point out the larger picture that is likely to emerge post the SpiceJet fiasco.

“Every time an airline shuts down, the risk rating goes up,” said Shyson Thomas, MD and CEO, Air Pegasus, a Bengaluru-based startup airline. India has already seen the grounding of Kingfisher Airlines (KfA) in 2012. The government, in all reality, cannot afford to let another airline shut down.

No one knows the consequences better than the proposed carrier. “Nobody is willing to lease aircraft after KfA’s problems,” explains Thomas. Air Pegasus is awaiting final clearances to commence operations with three ATR 72/500 aircraft leased from Ireland-based lessors.