Airlines look to attract customers with lower airfares as domestic demand plummets after new year

Domestic airfares have tumbled on many major domestic routes after peaking in recent months, fuelled by high costs and large domestic demand around the new year and Christmas.

Budget carrier GoFirst has slashed airfares as part of its Republic Day sale. Passengers can book domestic fares starting at Rs 1,199, while international airfares start at Rs 6,599.

Similarly, Air India last week offered discounts on its flight tickets across the airline's domestic network. Starting from an incredibly low one-way fare of Rs 1,705, the discounts will be available on over 49 domestic destinations.

SpiceJet also announced a Republic Day sale where the airline is offering 26 percent off on domestic flights, with airfares starting at Rs 1,126. Akasa Air has also cut prices across its routes.

While the country's largest airline, IndiGo, has not yet announced a Republic Day sale, it has matched the lowest rates offered by domestic airlines on routes. IndiGo is also offering up to Rs 1,000 off on tickets booked through its mobile application.

Airfares in January have decreased by 15-20 percent month-on-month (MoM), said Aloke Bajpai, Group CEO and Co-founder of Ixigo.

Similarly, online travel agents Yatra.com and Cleartrip said that airfares in January are down by around 15 percent compared to December.

According to data available with the Ministry of Civil Aviation, daily domestic passengers travelling in India has fallen from around 435,500 as of December 24 to around 406,684 passengers as of January 23.

Aviation experts said that the new prices reflect the competitive landscape present in India. The fact that all the airlines have reduced prices is a positive sign for the industry, going forward.

Lower prices are not only a reflection of airlines looking to grab or retain market share, but are a product of competition, demand, supply, costs, and potential cargo revenues.

Senior airline officials said that the fall in prices on many routes across India is also due to lower demand in the ongoing January-March quarter, which is the off-season for travel in India.

"Forward bookings for February and early March have dropped significantly in the last two weeks. Discounts will be key in driving demand in the market in the current quarter," the official added.

Another official from a domestic airline in India said that airlines are looking to cannibalise on the market share of the market leader, IndiGo.

"IndiGo has lost market share for the last three months. (It) is focusing on improving profitability and is not looking to engage in a price war," the second official said. He added that IndiGo focusing on profitability presents an opportunity for other domestic carriers to increase their market share.

However, despite the discounts offered by airlines in India, airfares are still much higher compared to pre-COVID levels and airfares are not expected to fall to pre-COVID levels anytime soon.

“If you look at the Delhi-Bombay route, an average ticket costs Rs 4,500 to Rs 5,500 now, which is much higher than the prices seen before the pandemic,” another senior official from a domestic airline said. The average price of a one-way ticket between Delhi and Mumbai was Rs 2,300-2,500 in December 2019.

Prices on popular routes

In December 2022, the average price of a one-way ticket between the two cities had risen to Rs 5,500 – Rs 6,500, historical data from airlines and online travel agents shows. The average ticket cost between the two cities now stands at around Rs 4,500 – Rs 5,500.

Airfares on the New Delhi-Goa route have witnessed a 40 percent fall since December and the New Delhi-Bengaluru route saw ticket prices fall by 15 percent.

The average spot fares for tickets on the Mumbai-Bengaluru route currently cost around Rs 4,000 - Rs 5,000, falling from around Rs 6,500 - Rs 7,500 in December.

Airfares on the Delhi-Bengaluru route have also fallen from Rs 7,000 in December to around Rs 5,000-6,500, currently.

Similarly, airfares between Delhi and Lucknow have also dropped in the last few days. It now ranges between Rs 2,500 - Rs 3,000, with Air Asia and IndiGo offering the cheapest rates. The cheapest seats on this route were earlier priced between Rs 3,500 - Rs 4,000.

Airfares between Kochi and Bengaluru have dropped to as low as Rs 1,500 - Rs 1,800, with GoFirst, IndiGo and Air Asia offering the cheapest flights on the route.