No fare cut despite low fuel costs

There is no fare respite in sight for air passengers following the 8% drop in jet fuel price this month. Not only that, with peak travel season kicking in, less number of low-fare tickets would be on offer by each airline, upping the travel costs by at least 10% in the October-December period, as compared to the previous quarter, say travel agents.

Most airlines hope to improve their yield per seat by 10-15% with higher load factors. However, what queers the pitch for the airlines is the additional capacity entering the domestic market over the next three months. Domestic carriers are slated to add 30,000 additional seats each month in the October-December period with at least half a dozen new aircraft entering the fleet of different airlines.

Carriers, meanwhile, have decided to adopt a wait-and-watch approach, while taking a call on reducing fuel surcharge. “We would like to see how the jet fuel rates move over the next two-three months, before taking a call,” said a senior airline executive from a full-service carrier. Similar is the sentiment among low-cost carriers.

Fuel surcharge have been doubled more than from Rs 220-level to touch Rs 750 per ticket over the past one year. With demand picking up in the winter months, typically most airlines cut the number of tickets in the low-fare basket by around 10%.

However, most in the industry find it difficult to predict the movement of fares in this season as additional seat capacity will put pressure on airlines to keep fares competitive. According to Jeh Wadia of Go Airways, the yield for airlines is more in higher fare baskets. “With higher load factors, our yields will also improve,” said Mr Wadia.

Ankur Bhatia of Amadeus India said the additional capacity would keep the pressure on the airlines to continue with their low fares. “Fares may remain the same or even drop,” he added. Airline executives confide in private that as demand peaks in the coming months, the number of seats available in the low fare baskets will be less.