As Diwali fails to light up travel, airlines drop fares

NEW DELHI: Airlines have slashed fares up to 8% in the run-up to Diwali, seeking to fill seats as they have not found enough takers for the tickets which they had priced higher in the hope of cashing in on the festive rush. Domestic carriers have announced multiple sales in the past few days, after having priced tickets higher anticipating stronger demand this year amid a supply crunch due to the bankruptcy of Go First and grounding of aircraft due to Pratt & Whitney engine issues.

“This is probably one of the rare years when there have been three sales in the festive season quarter, showing that airlines read the demand completely wrong,” said a SpiceJet executive, who did not wish to be identified.

Data from the civil aviation ministry shows average occupancy of airlines has stayed below 85%, against airlines’ expectation of 90% load in the peak season, while industry executives said there has been a 10-15% drop in yield compared to last year’s festive season. The drop is even sharper compared to the 2019 festive season, the last normal year before Covid-19, said industry executives.

Airline yield is generally expressed as revenue earned for each passenger for each kilometre and is a key indicator of profitability.

The cut in airfares comes at a time when airlines are incurring higher costs, including for jet fuel and airport charges which they are unable to make up through fares.

Gaurav Patwary, vice-president, air travel, at online travel portal Cleartrip, said fares in the week before Diwali have remained flat as compared to last year, at ?6,500 on average. The October-December period is traditionally the peak quarter for domestic airlines, with major festivals such as Durga Puja and Christmas along with New Year spurring air travel.

Ameya Joshi, founder of aviation blog Network Thoughts, said his research shows that for the first seven days of November, traffic decreased 3.5% over the previous month while airlines added 1.2% departing flights during this period. Compared to November 2019, there were 24,083 fewer passengers and 152 fewer departing flights per day. “2019 had seen the fall of Jet Airways impacting traffic and if we are below those numbers today, one needs to keep a close watch to see if demand is under pressure. There have also been ‘sale’ fares just days before Diwali and the overall traditionally peak season,” said Joshi.

Industry executives said people have cut down on travel spend, which shows that despite growth in air traffic, travel is still a discretionary spend for the larger population. “Festival season has not been of the optimum level. Airlines had kept fares higher expecting passengers to increase their travel spend, but that has not been the case,” said an executive of a domestic airline, who did not wish to be identified.