In recent days, fares have risen by around 20-25 per cent on most domestic routes on a month-on-month basis. With ATF prices being hiked to over Rs 1 lakh per kilolitre, fares are expected to rise further.
“This time the industry had already braced for an ATF price hike, with most of the airlines hiking fares on certain legs by about 20-25 per cent in the past couple of days,” said Aloke Bajpai, Co-founder and Group CEO, ixigo.
“However, despite rising airfares, demand for travel for the upcoming summer season is still going strong. We have seen an average MoM increase of 35-40 per cent in travel search queries in March for popular leisure destinations like Goa, Port Blair, Amritsar, Varanasi, Srinagar & Andaman & Nicobar,” Bajpai added.
Presently, fuel-based expenses account for around 40 per cent of the overall operating cost of an airline.
Significantly, the trend will hamper air passenger growth for the industry.
Besides, the rise in ATF prices might derail the economic recovery of India’s aviation sector, which has been heavily battered by Covid restrictions.
“ATF constitutes about 40 per cent of the operating cost of an airline, and the recent hike of 18 per cent in ATF will put significant margin pressure on the airlines. The impact of this will be seen in increase of ticket prices, and we should see an upward revision of 5-8 per cent in air fares,” said Jagannarayan Padmanabhan, Director and Practice Leader, Transport and Logistics, CRISIL (NS:) Infrastructure Advisory.
“This has come at a time when the industry was coming back to normalcy and the increased fare could prove to be a dampener for leisure travellers,” Padmanabhan added.
According to Suprio Banerjee, Vice President and Sector Head, ICRA (NS:): “ATF represents the single-largest cost element for airlines, accounting for 30-40 per cent of their total operating expenses. As such, the profitability of the airlines is significantly linked with ATF prices, which have witnessed consistent rise…
