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Air fares to head north during Independence Day weekend

LiveMint logoLiveMint 18-07-2017 Shally Seth Mohile

Mumbai: Air fares are expected to rise sharply in the week leading to 15 August. Fares are expected to remain at elevated levels even after the long weekend as a slowdown in the pace of capacity addition as compared to the year ago-period gives airlines enough pricing power, said executives at online ticketing firms and analysts.

This year, Independence Day falls on a Tuesday. While it’s not out of ordinary for fares to go up during long weekends, the quantum of jump this time is expected to be higher as compared to earlier holidays due to a combination of factors, including a strong passenger load factor and long gap between two holidays.

The lowest fare from Delhi to Goa on 5 August, for instance, is Rs3,246, as compared to Rs5,800 on 12 August. “The yields for the airlines during this period, are expected to go up by 30-40%, said Sharat Dhall, chief operating officer of B2C Business at Yatra Online, Inc.

While the jump could be as much as 10-15% across all the sectors, it could be as high as 80% for tourist destinations, said Himanshu Periwal, vice-president, growth, at Ixigo.com, a travel search marketplace. “One has always seen a 40-50% jump in fares during holidays and long weekends, this time around, it will be higher,” he said.

Amid intense competition and lower ATF (aviation turbine fuel), air fares, in a majority of the sectors for most part of the year, have either remained muted or lower, driven by promotions and flash sales by the airlines. Airlines slashed fares across most routes to fill planes ahead of the lean season that started in June end.

India’s domestic aviation market expanded 21.8% in fiscal 2016-17—the second consecutive year with 22% traffic growth. The research arm of rating agency ICRA expects it to moderate it to 13-15% in the current fiscal year.

Meanwhile, besides seasonal factors and one-offs, fares are also likely to go up as the capacity addition in the airline industry has slowed as compared to a year ago, said an analyst at a domestic brokerage. He declined to be identified. “When the capacity addition is less, there’s no urge to fill up the seats as there are fewer of them to be filled up and that may not come up at a discount,” he said.

ASKM (average seat kilometre), an indicator of capacity addition, has tapered off to around 15% in the June quarter this year as compared to 20% last year, said the analyst cited earlier.

Capacity addition, he said, has slowed owing to engine-related issues that market leader InterGlobe Aviation, which operates Indigo Airlines, is facing. India’s biggest airline grounded at least seven Airbus SE jetliners as it awaits fixes for Pratt & Whitney engines, joining several carriers around the world that have pulled the planes from service, Bloomberg reported on 14 July.

Uncertainties regarding taxes on import of an aircraft have also impacted induction of newer planes. On an average, an operator will have to pay additional Rs10-12 crore per aircraft in additional levies, including the 5% duty on plane imports, said AirAsia India managing director and chief executive Amar Abrol at a press meet on 4 July.

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