"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.
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