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Business News/ Companies / News/  Air fares will soar as crimped supply chains drag down airlines
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Air fares will soar as crimped supply chains drag down airlines

Supply chain disruption will dent growth of airlines, especially in an emerging market such as India. Mint explains:

IndiGo, India’s largest airline with a 58% market share, has grounded over 30 aircraft, more than 11% of its fleet.Premium
IndiGo, India’s largest airline with a 58% market share, has grounded over 30 aircraft, more than 11% of its fleet.

Airlines were preparing to deploy full capacity to cater to high demand in a post-covid world, but supply chain disruption has upset all calculations. This is set to impact airlines’ growth, especially in an emerging market such as India. Mint explains:

What is the supply chain issue?

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Aircraft and engine manufacturers are facing issues in sourcing raw materials and components. The production of planes, engines and components slowed due to the pandemic impact and the Russia-Ukraine war. The war has severely impacted the production and supply of key metals and alloys. Before the conflict, Russia was a major supplier of titanium for original equipment manufacturers in aviation, and Ukraine was an important source of titanium ore. Companies are trying to find ways to catch up with demand and the lengthening lead times are resulting in delayed delivery of aircraft, engines, and components.

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Air fares will soar as supply issues drag down airlines

Which airlines are impacted?

Every airline is affected to some extent; but currently, IndiGo and GoFirst are chiefly bearing the brunt of it. IndiGo, India’s largest airline with a 58% market share, has grounded over 30 aircraft, accounting for more than 11% of its fleet. GoFirst, which has around 8% market share, has grounded more than 25 aircraft, or nearly 47% of its fleet for at least seven days, a Mint analysis of Flightradar24 data showed. Air India has chalked out a 15-month plan to lease 30 aircraft to meet immediate capacity requirement. Vistara recently faced a delay in delivery of a leased wide-body Boeing 787.

Grounded but soaring
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Grounded but soaring

What are the implications on operations?

Instances of sudden cancellations by airlines has risen. Some are also pulling out of routes temporarily to adjust with available capacity. GoFirst recently halted Delhi-Male flights until 4 December. Travel agents have also seen a rise in last-minute chaos in flight timings and delays. Analysts expect more such instances on low-traction routes temporarily.

Will this put pressure on air fares?

Analysts and industry experts say rising travel demand and capacity deployment issues due to a parts shortage will put pressure on airfares during the peak travel season in December. Online travel operator Cleartrip has seen about 6% rise in airfares for the current quarter from September. For 21-31 December, rival Ixigo saw a 44% rise in airfares for the Bengaluru-Kolkata route. Capacity curbs are also visible in the winter schedule where GoFirst has been approved to operate 1,390 flight departures per week, a 40% dip from 2019.

When will this get resolved?

Industry experts say the supply chains will take at least one year to get back on track as global aviation companies will take 1-2 years to find long-term solutions to localize manufacturing and reduce dependency in sourcing raw materials. Airlines are evaluating options, including slowing down redeliveries through lease extensions, reinduction of aircraft into the fleet and wet leasing. Air India, Vistara, IndiGo, and SpiceJet have already opted to lease aircraft. But relief is expected only post 2023.

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Published: 08 Nov 2022, 11:25 PM IST
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