International airfares unlikely to soften much as normal flights resume

Flights to most international destinations, especially Europe and the Americas, are unlikely to get cheaper until the second half of 2022 even though India has decided to end the air bubble arrangement and allow normal scheduled operations from March 27.

However, some softening can be expected on West Asian and South East Asia routes in a few months.

Fares are likely to remain elevated because the aviation industry worldwide continues to struggle with high fuel prices, closure of airspaces over Ukraine and Russia, and muted demand for international travel. Airlines are unlikely to reduce fares until demand recovers.

Also read: Resumption of international flights: What's in store for Indian airlines 

“While many countries are promoting international tourism, high crude prices coupled with the tense geopolitical situation in Europe are likely to play spoilsport for any spike in demand,” said a senior executive of an Indian airline that operates internationally.

While under normal circumstances, airlines would look to offer discounts and cut prices to get passengers to travel again, most airlines are still struggling to repair their debt-laden balance sheets and align their operations for the future, the executive said.

There is also no guarantee anymore that the aviation sector worldwide will get government support, as was seen during the pandemic.

Industry and market experts and airline executives expect demand for travel between India and North America, Europe and South America to be limited at least till the second half of 2022.

However, travel to cheaper destinations in Asia, parts of Africa and even Australia is expected to rise in the next few months and airfares to these countries might soften in a couple of months.

International passenger demand was less than 25 percent and 50 percent that of 2019 levels in 2020 and 2021, respectively, according to the International Air Transport Association (IATA).

IATA expects international traffic to recover to pre-Covid levels of 2019 only by 2024. By the current calendar year, international traffic is expected to recover to about 70 percent of 2019 levels.

America and Europe

Travel demand between India and North America is unlikely to rise exponentially in the next few months due to heightening geopolitical tensions in Europe and limited flights.

The closure of Russian and Ukrainian airspace has made operating direct flights between India and North America unviable to due higher fuel burn and longer flight time.

IATA said the impact on airline costs as a result of fluctuations in energy prices or rerouting to avoid Russian airspace could have broader implications on consumer confidence and economic activity in Europe.

“Demand for travel to Europe and America is expected to be limited until universities in these countries start accepting students again, which will happen around August-September. Until then demand is likely to remain stunted,” an executive working at a Gulf-based airline said.

He added that most airlines around the world are limited in their ability to operate on razor-thin margins and are unlikely to offer massive discounts until sustained demand is visible.

Asia and Australia

The reopening of scheduled international flights is expected to immediately benefit routes between India and countries in West Asia and South-East Asia.

“Travel demand to the UAE, Qatar, Thailand, Singapore, Malaysia and Australia has been rising and is likely to see more traction going forward. Once demand to these countries reaches near pre-Covid levels, ticket prices are likely to fall,” an airline executive said.

Travel between India and the UAE, Qatar, Thailand, Maldives, Vietnam and Sri Lanka has already reached 50 percent of pre-Covid levels and the reopening of flights is likely to boost travel to these destinations, aviation analysts said.

The Travel Agents Federation of India expects airfares between Indian and countries in West Asia including the UAE to fall to about Rs 30,000 from the current Rs 35,000 after flights resume. Prices on routes between India and the UAE rose to as high as Rs 80,000 during the pandemic.

Australia has also seen interest from Indians after it opened its borders to international travellers on February 21.

Data from travel portals such as Yatra.com and Ixigo show flight bookings to Australia have risen by about 10 percent since February 21 and are expected to increase further in March as more flights start operating.

Travel agents expect the price of tickets to Australia to fall by as much as Rs 10,000 by the end of April from an average of about Rs 70,000 for a one-way ticket at the moment.