Aviation News

Airfares reach for the skies in monopoly, duopoly routes, Infra News, ET Infra


Airfares have soared up to threefold in this financial year on domestic routes where competition has receded to leave the skies open to just one or two airlines.

For instance, average fares for non-stop flights between Srinagar and Leh surged 229% between April and November, compared to 21% increase in airfares on average across routes in the country, according to data provided exclusively to ET by travel portal Ixigo.

Significantly, the number of flights on the Srinagar-Leh route nosedived to 78 from 469 during this period, showed data compiled for ET by global aviation analytics firm Cirium.

Air India is the sole carrier on this route, after Go First, which operated the majority of flights last year, went into bankruptcy in May this year.

Similarly, on the Jaipur-Goa route, IndiGo is the only airline offering non-stop flights, after Go First stopped operations, with the result that airfares increased 135% between April and November. Srinagar-Chandigarh, another route where Go First flew earlier and is now connected non-stop only by IndiGo, has seen a 113% increase in fares. Dehradun-Mumbai, which is now a duopoly between IndiGo and Vistara, has seen a 57% increase in fares.

India has about 1,100 air routes, nearly 800 of which are monopoly routes.

IndiGo, Air India Group Dominate Skies
Among these, about 500 are operated by IndiGo only, about 200 by Air India, Alliance Air and AirAsia India or Air India Express and less than 100 by SpiceJet, an erstwhile champion at connecting India’s smaller towns, which too has cut down capacity from last year due to operational and financial problems. Akasa Air operates a couple of routes. About 130 routes are a duopoly, operated primarily by IndiGo and Vistara, a Tata group airline. Some of them too have seen an increase in fares.

Although India has eight commercial airlines, IndiGo and Tata group’s airlines combined control 90% of the domestic air passenger market, according to November data from the Directorate General of Civil Aviation (DGCA).

Experts said the duopolistic turn in India’s aviation market portends a broadbased increase in airfares, which remained among the lowest in the world for years owing to intense competition.

“Airfares are characterised by three broad factors relating to supply and demand, competition intensity and cost environment,” said Mayur Patel, a Singapore-based regional sales director at aviation data platform OAG.

With the domestic aviation sector dominated by two players, IndiGo and Air India Group, Patel said India’s situation is similar to that of Australia, “with Qantas Group and Virgin Australia as key players supplemented by two smaller players, operated by Rex and Bonza”.

Praveen Iyer, chief commercial officer, Akasa Air, said the current airfares reflect a negative compound annual growth rate (CAGR) over the past four years. “The Indian domestic market, between November 2019 (pre-Covid-19) through November 2023, witnessed a de-growth of 4% in seats deployed. However, even the current domestic fare levels, compared to mature international domestic markets, are much lower,” he said. “We need to understand that even if we negate the two Covid years, a negative CAGR is always going to disturb the demand-supply balance, thus triggering a pricing environment that is unlike what we have witnessed in the past.”

Some, however, said consumers may have reasons to be optimistic.

“CAPA advisory expects that despite their dominant positions, there will be visible healthy competitive intensity of an order not seen before between India’s mega carriers in the domestic and short-haul international markets,” said global aviation advisory firm CAPA Centre for Aviation in November. “This is because both carriers are in a high growth phase which will allow consumers’ interests to be protected.”

To be sure, while the capacity cuts by ailing airlines have led to a short-term widening of the demand-supply gap in domestic air travel, that is set to change as the Tata group and IndiGo have together ordered about 1,000 aircraft to be delivered over the next decade, starting this month.

Earlier in December, civil aviation minister Jyotiraditya Scindia emphasised that airlines should put in place a self-monitoring mechanism for airfares and that ticket prices be kept in check on certain routes.

“The DGCA Tariff Monitoring Unit has been institutionalised to routinely monitor airfares on routes selected on a random basis,” said a statement from the aviation ministry.

India’s airline market is largely self-regulated. The government has in the past tried to keep a check on fares, but barring the pandemic, when fares were capped, it has largely failed.

That may change, said Patel of OAG. “Whilst there have been concerns on the rising airfares and what the merger between Air India and Vistara would entail, the DGCA has established the Tariff Monitoring Unit, tasked to routinely monitor airfares on routes selected on a random basis to keep airfares in check,” he said. “Similarly, airfares in Australia are monitored by the Australian Competition and Consumer Commission to ensure consumer protection and market balance are maintained.”

  • Published On Dec 19, 2023 at 12:04 PM IST

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