Cheaper air tickets may remain a distant dream for Indian flyers

Indian flyers may have to wait longer for relief from soaring airfares, even after the festive travel rush subsides, as persistently expensive aviation turbine fuel (ATF), a weaker rupee and disruptions linked to the West Asian conflict continue to weigh on airline costs and available capacity.

While a moderation in passenger demand after the festive season could ease some pressure on ticket prices, a sustained correction will depend on fuel prices easing and geopolitical disruptions receding, according to Kinjal Shah, senior vice president and co-group head, corporate sector ratings, at ICRA.

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“Airfares are expected to remain elevated in the near term,” Shah told ET Online in an emailed response.

The outlook comes as average one-way fares for travel between September 1 and November 10 rose 68% year-on-year on the Delhi-Hyderabad route, 51% on Mumbai-Kolkata, 39% on Delhi-Goa and 37% on Mumbai-Bengaluru, according to data reviewed by ET and first reported on October 5.

Fuel costs keep fares under pressure

The latest fare increases follow successive rises in aviation fuel prices. Domestic ATF prices climbed 16 rupees per litre from October 1 to around Rs 137, after increases of Rs 6.28 in September and Rs 5 in August.

Domestic ATF prices were 46.2% higher year-on-year in October, following increases of 18%, 24.7% and 33.4% in July, August and September, respectively, ICRA said.

With fuel accounting for around 30-40% of airlines’ operating expenses, the sustained increase has prompted carriers to revise passenger charges. Air India and Air India Express announced fuel surcharges of up to Rs 1,200 on domestic flights and up to $215 on international routes from October 9. Akasa Air also introduced or revised surcharges from October 8.

The pressure extends beyond fuel.

“Further, the depreciation of the INR against the USD remains an additional cost pressure, given that around 35-50% of airlines' costs are dollar-denominated, including fuel, aircraft lease rentals and maintenance expenses,” Shah said.

Fewer flight options complicate the picture

Higher costs are only part of the problem. The West Asian conflict has disrupted international operations through airspace restrictions, rerouting and capacity rationalisation, adding to airline expenses while limiting the number of seats effectively available to passengers.

Domestic flight schedules for October-December were down 5% year-on-year, while seat capacity declined by a more modest 1.2%, according to aviation analytics firm OAG. Airlines have deployed larger aircraft on some routes to maintain capacity, but the changes have been uneven across markets.

The demand outlook, meanwhile, offers little guarantee of an immediate fare correction. Domestic air passenger traffic declined 1.9% year-on-year in the first half of FY2027, while international passenger traffic for Indian carriers fell 19.3%, ICRA said.

The agency expects domestic passenger traffic to grow 3-6% in FY2027, but international passenger traffic for Indian carriers to decline 3-6%. The trajectory will depend on festive-season demand and how the geopolitical situation evolves.

“Consequently, while moderation in passenger demand after the festive season could provide some relief, the extent of any fare correction could remain limited if ATF prices, forex pressures and capacity constraints persist,” Shah said.

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Will government rules bring relief?

Centre is preparing rules to address concerns over sharp and arbitrary airfare fluctuations, but the proposed framework is not intended to regulate routine ticket prices.

The government plans to retain market-based pricing while allowing fare limits during extraordinary situations, such as natural calamities or disruptions. Under the proposed framework, airlines would submit fare structures to the Directorate General of Civil Aviation (DGCA) a month in advance and display them on their websites. The regulator would monitor fares against the highest fare bucket submitted by airlines.

The Supreme Court has asked Centre to submit the final rules by November 16. While the framework could improve oversight and provide for intervention in exceptional circumstances, it does not promise cheaper tickets during ordinary festive or holiday peaks.

A surcharge rollback is possible, not assured

For passengers hoping that the end of the festive rush will bring cheaper tickets, the distinction is between temporary moderation and lasting relief. Lower seasonal demand may ease pressure on some routes, but it cannot by itself reverse elevated fuel costs or restore capacity disrupted by geopolitical developments.

ICRA said airlines could review fuel surcharges if fuel prices ease sustainably. However, the timing and extent of any rollback would depend on the overall demand-supply situation and carriers’ ability to absorb operating costs.

“Accordingly, meaningful and sustained airfare relief would require a combination of moderation in ATF prices and easing of geopolitical and airspace-related disruptions,” Shah said.

For now, the end of the festive rush may offer some breathing room, but a broader fall in airfares will depend on whether the forces driving them higher begin to ease.