What high air fares? You are paying the same for flight tickets you did a decade ago; here’s why

Air fares in India are almost the same as a decade ago! Don’t rub your eyes! According to a recent analysis by ET, In 2012, historical data indicates that the average airfare for a November flight between Delhi and Mumbai stood at Rs 5,392. Fast forward 11 years, and this price has only marginally increased to Rs 5,557, reflecting a meager 3% rise.
This nominal increment is perplexing, considering that operational costs have doubled over the same period. Presently, airlines are shelling out 55% more for jet fuel and a staggering 127% more for landing at Mumbai airport compared to 2012.
While airfares witnessed a significant surge when travel rebounded in 2022 following a two-year hiatus due to the COVID-19 pandemic, and again during this year’s summer season, marked by Go First suspending operations and SpiceJet grounding numerous aircraft, industry experts contend that the situation has normalized since.
In this context, ‘normalcy’ signifies the airlines’ inability to raise fares beyond a certain threshold.

IndiGo‘s recent decision to levy an additional fuel charge on passenger tickets was anticipated to trigger a chain reaction among other airlines. Surprisingly, this anticipation was unfounded as no other carrier followed suit. Now, revenue managers at India’s largest airline are confronted with a dilemma: they must either reduce their base fares to remain competitive or risk losing customers to rival airlines, despite their substantial 60% market share.
This predicament faced by IndiGo mirrors the broader struggle of Indian airlines to raise ticket prices, which have remained virtually stagnant for a decade.

Ameya Joshi, the founder of the aviation blog Network Thoughts, noted, “We are past the phase of revenge tourism.” He further explained that in ordinary circumstances, demand exhibits a certain elasticity that hampers the ability to raise prices substantially. While the average fare has seen a modest increase over the years, the majority of passengers continue to be lured in by competitive pricing strategies.
This phenomenon can be attributed to several factors. Firstly, the airline industry is characterized by relentless competition. When prices escalate, another airline promptly enters the scene, sensing a profitable opportunity. Moreover, on certain routes, airlines discover that a mere difference of Rs 200 frequently prompts passengers to choose train travel over air travel.

An IndiGo executive dismissed the monopoly concerns surrounding their 60% market share, emphasizing the rapid market growth. He argued that to compete with other modes of transport like trains, airlines must continue offering competitive fares.
IndiGo serves 520 routes, many of which connect cities with robust rail and road networks.
Despite a decade of consolidation in the Indian aviation industry, marked by three airline closures and multiple mergers, experts believe that the industry hasn’t reaped any significant benefits.
The capacity lost due to Jet Airways’ shutdown was regained within nine months, and Indian airlines are poised to nearly double that capacity by 2024. Aviation research firm CAPA anticipates heightened competition among the top three airlines with new entrants, which, combined with the substantial capacity expansion by industry leaders like IndiGo and Air India, may offset the consolidation benefits. “Capacity induction by big players like IndiGo and Air India is likely to be three times of GDP growth (of the country), which will undo the benefits of consolidation,” CAPA was quoted as saying.
Air India CEO Campbell Wilson explained that airlines incur losses on tickets purchased more than 15 days in advance, prompting them to raise fares as the travel date approaches. Multiple fare brackets exist for a single route, but over half of them fail to cover operational costs. This shortfall in revenue is compensated by last-minute travelers who pay higher fares.
According to CAPA’s research in FY20, over 50% of Indian flyers purchased tickets that didn’t cover flight operational costs. Some industry observers believe that implementing better pricing strategies could enhance airlines’ profit margins, as many passengers have the capacity to pay higher fares.
Kapil Kaul, CEO South Asia of CAPA, observed a notable increase in customers’ willingness to pay on the top 10 routes over the past five years. He questioned the prevailing pricing strategy and why airlines aren’t inclined to raise fares.
Air India’s Wilson attributed the lack of pricing discipline to airlines with weak financial positions. He explained that the industry’s pricing power was previously constrained by the semi-commercial nature of state-run Air India. Smaller, undercapitalized airlines prioritized generating cash flow due to their financial fragility.
Wilson expressed optimism about improvements through consolidation. He anticipated that the transition to a healthier industry would necessitate corrections in airfare. With two professionally managed, well-funded airlines now in the market, he expects more robust dynamics.