Airfares are a consequence of market dynamics — determined solely by capacity available and passenger demand. When there is a shortage of capacity, fares are invariably high because, in such a scenario, passengers chase seats. Conversely, when demand is low and seats are chasing passengers, the fares are relatively reasonable.
Airfares have been reigning high for several months now. One initially justified the trend of high fares because the airlines needed to recoup losses suffered during the pandemic and also because the air turbine fuel (ATF) costs then were high. Airlines have naturally been lapping up this phase because higher fares translate into higher profitability for those airlines making profits and reduced losses for those which are deep in the red.
Positive Market Dynamics
The market dynamics have witnessed drastic changes in recent months, for the better, on both counts. The market has rebounded with vigour. The number of passengers flying daily has been exceeding the pre-Covid numbers, month after month. The ATF prices have also moderated.
So should the phase of high fares continue in the changed circumstances? It’s perhaps a sign of maturity that even our politicians, who have often accused airlines of fleecing passengers in the past, have been reticent this time and are not questioning the high fares.
This is also because most air travellers have taken the prevailing high fares in stride and are not complaining. The market has thus been on sustained growth. Every succeeding month, they have recorded an impressive number of travellers - an average of 4,04,585 passengers per day in January 2023, 4,31,013 in February and 4,15,909 in March. The number of flights operated per day averaged 2,918 in January 2023, 2,978 in February and 2,975 in March this year. The number of flights operated were always at a lower level than the 3,134 daily flights approved by the Directorate General of Civil Aviation (DGCA) for the winter schedule.
Fare Cap Removal
To digress, it was in August last year that the Civil Aviation Ministry had announced removal of limits imposed on domestic airfares effective August 31, 2022 paving the way for airlines to decide the price of air tickets. The limits had been imposed at the time of recommencement of flight operations effective May 25, 2020, after the same had been suspended due pandemic in March 2020.
The government has rightly observed that it is not for it to dictate or meddle in the matter of air fares. Let market determine the fares has been its consistent stand in recent years. No right-thinking person will fault the government on it. But can the government look the other way if the capacity deployed by airlines is substantially less that approved by DGCA?
As per established practice all airlines get flight schedules — how many flights will the airline operate, on which sectors, etc. — approved by DGCA twice a year, which in common parlance is called summer and winter schedules. Summer schedule extends from last Sunday of March to last Saturday of October and winter schedule from last Sunday of October to last Saturday of March.
The DGCA had approved the summer schedule for an aggregate 22,907 flights per week, which translates to 3,272 flights per day. Alliance Air, Air Asia, SpiceJet and Vistara had sought approval for operating lesser number of flights than the previous schedule. One isn’t sure if the DGCA has a system of checking with concerned airlines as to why they have planned to operate fewer flights in a growing market?
Are all the eleven airlines serving domestic routes collectively operating the approved number of flights (3,272) currently? No. The number of flights being operated have been less than 3,000 per day. With the suspension of operations by Go First from first week of May, the number has dwindled even further.
Even though Air India, Vistara and Indigo have introduced additional flights on some of the routes vacated by Go First, the number of flights operated are still significantly lower than approved by the DGCA. Are airlines guilty of deliberately operating fewer flights to record higher load factors? Yes! Have the fewer flights available to passengers resulted in higher fares? Yes!
Regulating Fares Through Capacity
Should the airlines be allowed to operate less flights than they had got approval for, without a valid reason? No. As it impacts passengers by way of higher fares, the question that the DGCA should be pondering on is whether it should force the airlines to operate the number of flights that they had committed in the summer schedule or allow airlines the freedom to decide how many flights they wish to operate?
Since capacity availability is having a bearing on fares, and market is still witnessing growth, should the DGCA intervene? Certainly not by asking the airlines to review fares but by ensuring that the capacity deployment conforms to airlines’ own schedules submitted to DGCA for approval. The rationale of airlines’ seeking advance approval and the DGCA according its consent will be lost if the latter has to act as a mute spectator.
One can only hope that the DGCA takes cognisance of market developments and acts to cool fares to some extent through availability of adequate number of flights, which is certainly in the domain of the DGCA and the Ministry of Civil Aviation. Let’s hope they act soon in the interest of travelling public.
Jitender Bhargava is former executive director, Air India & author of The Descent of Air India. Views are personal, and do not represent the stand of this publication.
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