Reduced competition on domestic routes pushing up air fares: Report

By July 2024, IndiGo and the Air India Group dominated over 90% of the domestic air passenger market, as reported by the Directorate General of Civil Aviation.

India is seeing a reduced competition on domestic air routes which could be the main reason for airlines going for aggressive fare hikes.

The number of domestic routes lacking competition has surged from 55.2 percent in April 2019 to 69.2 percent in April 2024, the Business Standard has said, citing a report by aviation analytics firm Cirium. As of April 2024, only 30.8 percent of the 1,083 routes had more than one airline, the report said.

The drop in competition has led to a noticeable increase in fares, particularly in the wake of the Covid-19 pandemic. For instance, on the Delhi-Mumbai route, average fares fell by 20.5 percent between April 2019 and April 2023 but have surged by 34.6 percent in the past year alone.

Similarly, the Delhi-Bengaluru route has seen a dramatic 53.1 percent increase in average economy fares over the past year.

Moneycontrol could not independently verify the report.

The rise in fares can be attributed to the bankruptcies of Jet Airways in 2019 and Go First in 2023, along with significant network reductions by SpiceJet due to financial constraints.

By July 2024, IndiGo and the Air India Group dominated over 90 percent of the domestic air passenger market, as reported by the Directorate General of Civil Aviation.

With competition diminishing, airlines have shifted their strategies towards achieving higher yields — average revenue per passenger per kilometre — rather than focusing on filling planes with lower fares.

The trend was evident during the long weekend of August 15-19, which saw a surge in air travel due to Independence Day and Rakshabandhan.

Despite some routes experiencing lower load factors, airlines refrained from dropping spot fares significantly.

“Before the pandemic, airlines would often lower fares significantly if planes were not full close to departure, with competitors following suit. Now, such fare drops are rare as the industry focus has shifted towards achieving better yields,” the report quoted a revenue management executive from a major airline as saying.