Air fares rise on routes connecting small cities

Even as the average domestic fares saw a fall during the second quarter of the current financial year, fares between routes connecting smaller cities saw a double-digit increase compared to the same period last year. Fares of routes connecting metros, however, declined during the same period.

Analysts say the demand-supply mismatch between small city pairs and routes that connect smaller cities, and bad economic situation has led to rise in fairs in these routes.

According to American Express data, which is a comparison of the base fares during July-September 2010 with the same period in 2011, shows that smaller cities are seeing an increase in fares. It also shows the large city pairs have seen a decline in fares leading to around 14 per cent fall in the domestic fares. The average domestic fare during the period was Rs 3,500, that is around 14 per cent less than the same period last year.

Analysts say bad capacity management by airlines is the reason behind the rising fares in the non-trunk routes.

“India is growing in smaller cities and unfortunately infrastructure is not keeping pace. This combined with the unavailability of smaller aircrafts with Indian carriers, is causing the price rise. Availability of few seats on the route also cause the price to rise,” said Keyur Joshi, Co Founder & Chief Operating Officer of MakeMyTrip.Com, an online travel portal.

He adds that certain routes do not have demand for one flight with a 180-seater aircraft, but three 80-seater aircraft in the morning, afternoon and evening. There is also a feeling that the government should play some active in allotting capacity at all the metro routes. “The regulator should sit with the airlines and allot routes to avoid any kind of mismatch in demand and supply. Airlines have put too much capacity in the cream routes, depriving the routes connecting smaller cities, leading to a huge mismatch,” said Ajay Prakash, president of the Travel Agents Federation of India. But, the airlines say they cannot allocate too much capacity in the non-trunk routes as the demand on these routes is seasonal. “Demand in the non-trunk routes is seasonal and does not guarantee the same yield always. The fares are down overall because two of the large carriers are pricing their tickets very low leading to competition,” said a senior airline executive, who did not want to be named.

Joshi, on the other hand, says the full-service airlines should build proper hub and spoke operations in India. “The low-cost carriers need to look at ordering different type of aircrafts – SpiceJet has started it and more carriers need to focus on it. Single type aircraft works where infrastructure and demand patterns are similar, like Europe and the US,” he added.
 

TAKING OFF Fares in the July-Sept period
Routes	Fare rise/ fall (%)*
Bhuj-Mumbai	196.18
Bangalore-Nagpur	149.00
Jaipur-Pune	66.60
Delhi-Udaipur	48.00
Mumbai-Kandla	34.00
Bangalore-Mangalore	23.00
Cochin-Hydearbad	19.96
Ahmedabad-Kolkata	19.71
Kolkata-Pune	15.00
Bangalore-Delhi	-7.41
Delhi-Madras	-15.83
Mumbai-Delhi	-18.30
Delhi-Kolkata	-21.00
*All fares are one-way base fare Rise/fall in comparison to fares in 2010 Source: American Express

Around 75 per cent of the total capacity of airlines is in the trunk routes making Delhi and Mumbai the two busiest airports in the country. These two airports alone constitute around 60 per cent of the total traffic movement in the country.

The low-cost carriers in India, excluding SpiceJet, operate single kind of aircraft. IndiGo and GoAir operates Airbus 320s but SpiceJet operates Boeing 737s and 70-seater Bombardier aircraft.

However, some feel that the trunk routes are seeing a fall because of the slowdown in the global economy and are temporary. “Every corporate firm is trying to avoid cost and is also travelling less. Less travel by corporates might have led to the fall in fares in trunk routes,” said Sushi Shayamal, partner, Ernst & Young, a financial consultancy firm.