India's largest airline has introduced a distance-dependent fuel surcharge and other airlines are expected to follow suit. Doubt that will have much effect on India's consistently growing aviation sector.
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Low-cost carrier Indigo has now introduced a distance-based fuel charge on domestic and international routes.
Why This Fare Hike? The decision follows the significant increase in Aviation Turbine Fuel (ATF) prices, which have surged in the last three months with consecutive price hikes every month, the airline said.
“ATF accounts for a substantial portion of an airline’s operating expenses, necessitating far adjustment to address such a cost surge,” Indigo said in the statement.
The Fuel Hike Saga: In the fourth straight monthly increase since July, the price of Aviation Turbine Fuel (ATF) or jet fuel, was hiked by 5% on October 1 to INR 118,000 ($1417) per kilo liter. On September 1 the government announced a 14% increase in ATF pushing the price to INR 112,000 (41345) per kilo liter. This ad marked the highest point since December 2022.
While highlighting the healthy recovery of India’s air passenger traffic for August, aviation research firm ICRA had last month talked about the challenges stemming from elevated ATF prices and the depreciation of the INR against the US dollar compared to pre-Covid levels.
How Does it Affect Airlines? ATF constitutes almost 40% of operating expenses for airlines, thereby making them significantly sensitive to such fluctuations.
Under this pricing structure, passengers booking Indigo flights will incur a fuel charge, per sector, based on the distance.
Fare Hike Based on Distance
|Sector Distance (in KM)||Fuel Charge|
|3501 and above||INR 1000|
The country’s largest carrier in terms of market share and fleet size, the airline, reassured its customers of its commitment to offering affordable fares. The airline will be publishing the tariff sheet subsequently, with the sector-wise charges.
Other carriers are also expected to follow Indigo’s footsteps and hike airfares.
OTA Market Accounts for Only 25% of Indian Travel Market
We read travel research firm Videc’s India Travel Market Sizing report and here’s what we found out:
- The Indian travel market opportunity was valued at INR 3,892 billion ($49 billion) in fiscal 2023, surpassing the pre-pandemic levels of INR 3,402 billion ($48 billion) in fiscal 2020.
- The travel market is projected to reach INR 5,787 billion ($72 billion) by fiscal 2026.
- However, online travel agencies (OTAs) accounted for only 25% of the total travel market in fiscal 2023.
Factors Driving OTA Growth:
- Growing appetite for booking travel services online among Indians for convenience and ease of access.
- Supply side fragmentation and price-sensitive consumers with high service expectations.
- Expansion of OTAs into tier-2 and tier-3 markets, leading to the “next billion Indian opportunity.”
Top Indian OTAs:
- MakeMyTrip Group leads with a 54% share of total OTA gross booking value.
- Cleartrip, EaseMyTrip, and Ixigo Group compete for the second spot. The report notes Cleartrip enjoys a slight edge over the otherd.
- Yatra holds a 6.6% share among the top five.
Diversification of OTAs:
- Indian OTAs are evolving from pure consumer businesses to hybrid business models, including fintech, visa services, advertising, and platform offerings.
- MakeMyTrip has expanded into business-to-business, corporate, and fintech segments.
- Cleartrip has a strong presence in hotels and is growing its busness-to-business arm.
- EaseMyTrip (EMT) has seen significant growth and aims to expand its non-air business mix.
- Ixigo has acquired ConfirmTkt and AbhiBus, focusing on ground transportation.
- Yatra has pursued both consumer retail and B2B business mix, with acquisitions to enrich its offerings.
EaseMyTrip Offers ‘Cancel for Any Reason’ Protection
EaseMyTrip.com has partnered with Cover Genius to provide a “Cancel for Any Reason” travel protection to its users while booking their tickets.
The online travel company noted that Cancel for Any Reason is becoming increasingly popular, with both consumers and online travel agencies (OTAs), as it eliminates paperwork during refund requests. Additionally, for OTAs, it removes the need for insurance licensing.
Around 32% of Indian travelers said they would prefer to buy protection from travel providers, agents or airlines — rather than traditional insurance sources such as credit cards, which deliver a significantly lower post-claim score, according to a survey conducted by Momentive.ai.
“Travel protection is no longer an after-thought but a must-have, and not only that, it must now be fit-for-purpose, ready to serve and encourage travelers with protection that covers all manner of uncertainties and what-ifs,” said Barney Pierce, senior vice president, strategic partnerships, APAC for Cover Genius.
Ibis Styles Comes to Goa’s Vagator
InterGlobe Hotels in partnership with Accor announced the launch of its newest hotel in Goa — ibis Styles Goa Vagator. The 142-room hotel is the second ibis Styles hotel in popular beach destination Goa.
Accor is anticipating a substantial influx of both domestic and international tourists this season, according to Puneet Dhawan, Senior Vice President of Operations — Accor India & South Asia.
To celebrate the launch, ibis Styles Goa Vagator has introduced an exclusive offer of “Pay What You Wan,” a signature offering from ibis brands, exclusively for members of Accor’s loyalty program.
Domestic Traffic Continues to Soar
India’s domestic traffic stood above pre-pandemic levels for the 7th consecutive month in August, according to the latest data shared by the International Air Transport Association (IATA).
Revenue passenger kilometer increased over 6% over 2019 levels and 23% compared to last year. Based on the most recent data and developments for the country’s airlines, the Indian domestic market indicates that it has resumed its pre-pandemic growth trend.
While India accounted for 2% of the world share in the domestic passenger market, it also witnessed a growth of almost 16% in available seat kilometers with passenger load factor going up to reach 84%.
India’s aviation regulator Directorate General of Civil Aviation (DGCA) had earlier highlighted that domestic air passenger traffic reached 12.4 million in August. Budget carrier Indigo flew 7.8 million passengers accounting for 63% of the total domestic passenger volume.
Bangladesh Tops India’s Foreign Arrival List
Over 3.8 million foreigners visited India in the past year as per the annual report of the Ministry of Home Affairs released on Saturday.
The report from April 1, 2022-October 31, 2022 shows that the visit is double the number of foreigners compared to the past year.
The maximum number of foreigners who visited India during this period were from:
- Bangladesh — 8,42,869
- U.S. — 8,05,692
- UK — 3,75,157
- Australia — 1,84,343
- Canada — 1,45,221
- Sri Lanka — 1,11,455
- Nepal — 88,460
- Germany — 86,006
- Malaysia — 83,808
- Singapore — 78,888.
These 10 countries accounted for 73% of the total arrival of foreigners.
The report noted that 313,414 tourist visas were granted free of cost to foreign nationals during between October 16, 2021-March 31, 2022.
India currently grants e-visa facility, under five subcategories — tourist, business, conference, medical and medical attendant — to nationals of 165 countries.
In addition to the e-visa facility, nationals of Japan, South Korea and United Arab Emirates can also avail visa on arrival.
India’s Insolvency Rule Change Will Help Aircraft Lessors
The Indian government last week announced that the moratorium under the Insolvency and Bankruptcy Code, 2016 will not apply to aircraft, aircraft engines, airframes and helicopters governed by the Cape Town Convention.
The amendment makes it easier for lessors to recover planes if an airline goes bankrupt.
The GoFirst Angle: Following the ongoing insolvency resolution of GoFirst, the development is seen as a major relief to the aircraft lessors, as this may allow them to reclaim the possession of their leased aircraft that continues to be in the possession of the corporate debtor due to the moratorium granted by the National Company Law Tribunal.
Akasa Reaction: Reacting to this decision, Indian low-cost carrier Akasa Air said the latest amendment will encourage lessors to collaborate with Indian airlines by leasing more aircraft at commercially favorable rates.
“The Indian aviation industry is set to grow multi-fold in the coming years. Currently, close to 80% of aircraft in India are leased, and as players continue to expand their operations, and the industry carves space for new players, India will need continued support from lessors to cater to this growth,” said Vinay Dube, founder and CEO of Akasa Air.
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Photo credit: Passengers booking Indigo flights will incur a fuel charge, per sector, based on the distance. stefano @viation / A321neo IndiGo Airlines - XFW