Graphic: Ajay Negi/Mint
Graphic: Ajay Negi/Mint

December airfares are the cheapest since 2010

Lower aviation fuel price and increase in capacity drive down ticket prices duringthe holiday season

Mumbai: In his 25 years as the owner of a travel agency in Mumbai, Regi Philip has seldom seen year-end airfares so low.

Philip, 52, is looking at domestic fares that are the lowest since 2010, at a time when holiday travel demand usually boosts airfares. Philip, who runs Cosmos Agencies, has sold at least 150 tickets ranging from 2,500 to 4,000.

While one of the main reasons for affordable airfares is that airlines are benefiting from crude oil prices that have crashed to a six-year low, increased passenger-carrying capacity has also helped keep fares low and encouraged more people to choose air travel.

“This has led to a spike in travel in the domestic market and we expect late bookers to also get the advantage of these attractive fares and make holidays much more affordable. It’s good for business," said John Nair, head of business travel at Cox & Kings Ltd.

A typical Mumbai-Goa flight ticket is available for less than 5,000 or even less than 3,000 in certain cases starting 20 December to 1 January against more than 10,000 in the past five years, according to travel agents. Goa is the most popular destination in India for holidaying during Christmas and New Year’s eve.

A Mumbai-Delhi ticket is available starting at 5,000 for the same period against 14,000 in the past five years.

“One of the main reasons is of ATF (aviation turbine fuel) prices decreasing drastically, which has been a big relief to the airlines," said Sharat Dhall, president, Yatra Online Pvt. Ltd. “The second factor that has been driving down fares is that capacity has increased."

ATF or jet fuel prices account for more than 45-55% of an airline’s revenue in India. A 4% reduction in fuel costs adds around 2% to the operating margins of airlines, according to India Ratings and Research.

Brent crude is currently trading below $40 per barrel. It has dropped 72.5% from its all-time high of $147.50 recorded in mid-July 2008 and from June 2014 to till date, it has dropped 62%.

In addition, two new national airlines have started operations since June 2014.

AirAsia India, controlled by AirAsia Bhd, started operations on 12 June 2014 with a single Airbus A320 aircraft. In just about a year, the airline has grown to a fleet of five, flying to 10 destinations. It has now carried more than a million passengers.

Vistara, a joint venture between Tata Sons Ltd and Singapore Airlines Ltd, last month added a ninth aircraft to its fleet of Airbus A-320s. Vistara started commercial operations on 9 January.

InterGlobe Aviation Ltd, which runs the country’s largest airline by passengers carried, and Jet Airways (India) Ltd, the second largest airline declined to comment.

Philip said lower fares are available where capacity is more such as Delhi, Mumbai, Goa and Bengaluru sectors. Sectors such as Kerala and Kashmir are still expensive, he added.