37140 Investors following Kingfisher Air. Share this News with them.
0
Like this story, share it with millions of investors on M3
Soaring airfares pushing travelers back to trains?
The low cost party seems to be getting over, at least for now, both for air passengers and for airlines. Domestic airfares this season are up 10-15% and so demand is down by almost 5%.
The low cost party seems to be getting over, at least for now, both for air passengers and for airlines. Domestic airfares this season are up 10-15% and so demand is down by almost 5%.
Increased airfares seem to be forcing some to go back to the trains. Low cost airlines have seen a dip of over 5% in demand this September over last year. The advance bookings for October are also down about 4% so far. This is a result of consolidation in the industry and a consequent 10% plus increase in airfares
Ashwini Kakkar, Vice Chairman, Mercury Travels said, "Fuel prices are up, surcharges are almost Rs 1600, so there is no ticket less than Rs 2000."
The over 20% growth in air travel in the last two years prompted airlines to order over 300 aircraft. This led to overcapacity and a dip in airfares. Experts say a substantial increase in air travel was because of airfares that matched rail fares or were just marginally higher. Now that fares are over 20% higher than rail fares, within a matter of three months they are beginning to impact demand.
Kapil Kaul, CEO, CAPA said, "There is a pressure on airlines to break even by investors. They should have raised fares slowly. Demand is showing signs of slowing down."
But experts say this dip could be temporary, Once the integration of Jet Sahara, Kingfisher Deccan and Air India and Indian is complete, capacity will be rationalised and the benefits of integration will help these airlines offer cheaper fares. Hedging fuel will also help airlines manage their costs better. So players are expecting that by next year same time, the industry will be flying high once again.
The low cost party seems to be getting over, at least for now, both for air passengers and for airlines. 
