Airfare unlikely to return to pre-Covid levels due to rising fuel costs


Air ticket prices: As airlines grapple with rising fuel and labor costs, domestic airfares are unlikely to return to pre-Covid-19 levels anytime soon, airline executives say.

“Pre-Covid air fares in India were unsustainable. Back then, only one airline was reporting a profit, at a time when jet fuel prices were half of today’s levels,” said a senior airline executive.

“Even now, despite high demand, airlines are posting high losses. This indicates that air fares need to rise in India,” the executive added.

The same person went on to say that most airlines are in no mood to start a fare war right now, when international supply chains are disrupted and gas prices are still quite high after the Russian invasion of Ukraine.

“It’s unusual. You have demand that is rapidly outstripping supply in India. I think we could have a couple of months where demand and supply are not aligned,” another senior IndiGo executive told Moneycontrol.

Airline ticket prices

The CEO went on to say that while airfares are unlikely to decrease anytime soon, they could partially increase if oil prices continue to rise and the global economy continues to worsen.

“Pilot shortages, delivery shortages from both Boeing and Airbus, air traffic control congestion and airport infrastructure constraints around the world are real, and they are constraints that will take years to be resolved,” added a senior executive of another national company.

In a similar vein, a GoFirst official stated that while travel demand has recovered to pre-Covid-19 levels in India, tight capacity and high fuel prices would likely prevent the rates reach pre-Covid-19 levels anytime soon.

“The supply chain issues are expected to improve in the next six months, but it has affected Indian aviation’s plans to increase capacity over the next two years,” the GoFirst official said.

The grounding of more than 75 aircraft, or about 10-12 percent of the fleet, creates difficulties for Indian carriers in an already unfavorable cost climate.

According to CAPA, major supply chain concerns have reduced airline capacity and could become widespread in the next fiscal year starting in April 2023. Future aircraft deliveries will be affected by this, as well such as those currently being delivered.

Additionally, CAPA India has increased its predictions of losses for Indian carriers in fiscal 2023 from $1.4 billion to $1.7 billion to approximately $2.5 billion. According to the consulting group, the situation will remain difficult as geopolitical forces are influencing fuel prices and disrupting the supply chain.

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