Airlines to hike fares by end of this month: SpiceJet chairman Ajay Singh

SpiceJet Chairman Ajay Singh expects a significant increase in industry-wide fares in October, as airlines battle rising costs and falling profits. While Singh did not specify the quantum of hike, he said fares could rise after the end of the Shradh period next week. Rising crude oil prices and a weakened rupee have dented airline profitability, but carriers have been unable to pass on the higher costs to consumers. As such, fares remain depressed.

"Of course, there will be an increase in fares. There is no doubt," Singh told Business Standard on Friday. He said the hikes could happen in both advance purchase and spot fares, and expressed confidence that consumers would bear the higher ticket prices. Fueled by low fares, domestic air travel has risen over 21 per cent in the first eight months of 2018 over same period last year. In fact, the domestic market has seen double-digit growth for 48 months in a row. Intense competition, increased capacity addition, and cash crunch in airlines like Jet Airways are key reasons for fares remaining low. While Singh is confident of a fare hike, rival carriers appear cautious. "We will increase fares but it depends on 'if' and 'when'," said an executive from another private airline, attributing the same to competitive pressure. Another executive said Jet Airways launched yet another discount offer on Friday, adding that all airlines were selling cheap tickets, except for travel on Diwali and Dussehra days.

"The combination of peak travel season, the recent hike in ATF (aviation turbine fuel), and the falling rupee have all resulted in fares starting rising on the most popular routes, where load factors are high. We expect to see higher spot fares as we move closer to the festive dates, which is in line with the trends we have seen over the past few years," said Sharat Dhall, chief operating officer (B2C), Yatra.com.

CRISIL believes the declining trend in fares will reverse in Q3, on the back of robust demand from customers with low sensitivity to fares, higher operating costs, as well as pressure on profitability. The third quarter is seasonally strong and accounted for 27 per cent of revenue and 26 per cent of the annual traffic for listed airlines in the last fiscal year. CRISIL expects a 3 per cent increase in fares, but this will not offset the 20 per cent increase in operating costs, CRISIL said.
 

Flying high
 

• According to CRISIL, operating costs have risen 20 per cent
• Fares remain low except for travel during Diwali, Dussera
• Intense competition, cash crunch key reasons for fares remaining low
• Domestic air travel has risen over 21 per cent till August 2018