New Delhi/Mumbai: Experts say the 2019 summer holiday travel season is expected to be marred by high airfares as debt-ridden Jet Airways gradually truncates flight operations. Even though the airline, lenders, and the government are still hopeful of a revival, the current trend might see Jet operating a bare minimum fleet, thus bumping up airfares.
“The grounding of aircraft due to liquidity issues with Jet Airways and regulatory directive for the grounding of B737 Max aircraft have resulted in a 15 percent impact on the industry capacity,” said Kinjal Shah, Vice President of Corporate Ratings, ICRA.
“This has resulted in passenger inconvenience. Furthermore, it has resulted in a significant increase in fares. With the industry capacity remaining constrained, the fares are expected to remain high in the near term.
Jet’s woes assume criticality as the airline, which once operated around 120 aircraft, is left with just 16 in its fleet. Last Friday, it operated 11 aircraft.
The airline has suspended international operations until the weekend and canceled domestic flights, leaving passengers stranded at various airports. This has led even the Prime Minister’s Office (PMO) to assess Jet Airways’ financial situation.
“With Jet now canceling international flights, the rising fare situation is set to worsen if capacity is not increased before peak summer travel season,” said Aloke Bajpai, CEO and Co-founder of ixigo.
“A comparative analysis of April 2019 fares and what the scenario was last year shows that fares for flights originating from Delhi have increased by 19 percent, and flights from Mumbai are up by 36 percent. Passengers planning their summer leisure travel will also be impacted due to the availability of seats.”
Sharat Dhall, COO (B2C), Yatra.com, said: “With the peak travel season having kicked off, we expect airlines to induct more aircraft to meet the increased demand on the key business and leisure routes.”
“This will also rationalize airfares, and we expect them to increase only marginally compared to the same season last year.”
In addition, Dhall said: “We see other carriers adding capacity daily to fill the demand-supply gap, and that keeps fares under control.”
“It is only the last-minute fares that are seeing a jump. So it is unlikely to impact the summer vacation travel season as most leisure travelers book well in advance and will not be impacted.”
The trend of high airfares triggered by Jet’s truncation of its operations was amplified by oil marketing companies, which increased the price of aviation turbine fuel (ATF).
Since March 14, passengers have had to pay high fares as several more flights have been canceled due to the grounding of Boeing 737-MAX aircraft.
The culmination of these factors is expected to decelerate the passenger traffic growth in the country.
In a recent note, rating agency Fitch said that the Indian aviation market has seen a sharp increase in airfares in the last few months due to tight supply, worsened by the suspension of the 737 MAX aircraft.
“Fitch expects the growth in revenue passenger kilometers (RPK), which decelerated to 12.4 percent in January (2018: 19.9 percent), to weaken further until supply increases,” the rating agency said in a note.
In addition, the note said that Jet Airways, with its subsidiary JetLite, had the second-largest share of the domestic market until January. Still, it has been steadily losing market share as it has been forced to shrink its operating fleet due to financial troubles.
