Indian Airfares Soar: What’s Behind This Year’s Surge?

Airfares in India have been soaring this year and a new report confirms the trend.

India experienced the highest increase in airfares among countries in the Asia Pacific region, according to a study conducted by Airports Council International (ACI) in collaboration with Flare Aviation Consulting.

“The fares have significantly increased, almost doubling the average fare for routes such as Mumbai-Delhi, with a fare that used to be around $70 now reaching approximately $110,” said Ajay Prakash, CEO of Nomad Travels.

Some claim the price surge is actually “price gouging,” considering the substantial rise in fares that followed the tragic train accident earlier this month.

“Although domestic flights are consistently full, indicating the resilience of Indian travelers, the situation raises concerns about the ethics and fairness of the airline industry,” noted Prakash.

The ACI study attributes the high airfares to rising fuel prices, lack of competition and pent-up demand. ACI notes a 76 percent hike in fuel prices compared to 2019 and a 10 percent increase in the Consumer Price Index. 

While the addition of more capacity by the end of the year may lead to some relief on fares in India, the uncertainty surrounding the revival of Go First makes the situation more complicated. Go First canceled operations in early May leaving a gap of over 300 daily flights.

Airline passengers on online platform LocalCircles reported an abnormal surge in real-time airfares with some airlines charging as much as $425 for a one-way ticket from Delhi-Leh, which otherwise would have cost no more than $140.

Last year, on August 31, after two years of implementing fare caps on domestic routes, the Indian government granted airlines greater flexibility to set fares by removing the minimum and maximum price restrictions.

Since September of last year, LocalCircles reported it has received over a hundred complaints about escalating airfares, with some consumers accusing airlines of profiteering.

Following a recent surge in complaints in May, particularly after Go First suspended its flights, LocalCircles conducted a survey among airline passengers.

Out of the 12,193 respondents, 65 percent expressed support that the government should reverse its decision to remove the price caps.

Post-Covid, the airfares in and to/from India have indeed remained significantly higher than the pre-Covid levels by an average 35-45 percent, said Vishal Bhadola, founder and CEO of Eyeforsky, an aviation knowledge platform.

Airlines Register Record-Breaking Profits

The ACI study analyzed approximately 36,000 routes in the top 10 aviation markets in Asia-Pacific and the Middle East.

On average, the countries with the biggest gains include India (41 percent), United Arab Emirates (34 percent), Singapore (30 percent), and Australia (23 percent).

ACI noted that in the first quarter of 2023, despite an increase in traffic, domestic airfares have continued to rise in several of these markets, including India, Indonesia, Saudi Arabia, South Korea and Japan. 

The study reveals that while airport charges have remained stable since the pandemic, airfares have topped pre-pandemic levels.

Bhadola said rising airfares are unlikely to stall the surge in Indian aviation. Major airlines in the region have recently announced record profits for the 2022 financial year and that’s also true for Indian airlines.

In fiscal 2023, IndiGo, the leading airline in India in terms of market share, reported its best-ever fourth quarter net profit, while full service-carrier Vistara in the third quarter announced that it managed to break even for the first time.

SpiceJet reported an unexpected fourfold increase in net profit.

And Then Some Good News

Last week, the Indian aviation ministry in a meeting with the airlines’ advisory group urged carriers to develop a system to maintain fair prices, particularly on routes previously operated by Go First.

“We have witnessed a significant drop of 25-30 percent in spot (real-time) fares across key routes, following the recent meeting of the aviation ministry with the airlines’ advisory group,” noted Aloke Bajpai, group CEO and co-founder of online travel platform Ixigo.

The discussions between airlines and the government have paved the way for much-needed relief for all last-minute flyers traveling due to medical or work emergencies, said Bajpai.