As competition continues to decrease, there is likely to be a surge in fares, be it in whatever sector. Similarly, India's domestic aviation market is also witnessing a significant shift, with a remarkable increase in airfares driven by factors such as the decrease in competition among airlines.
This change, according to the Business Standard report, is mostly influenced by the financial struggles and bankruptcies faced by several major players in the market, which once reshaped the dynamics of air travel in the country.
Decline in Competition Across Domestic Routes
According to the Business Standard report, over the past 5 years, there has been a noteworthy increase in the number of domestic routes with limited competition.
Decline in Competition Across Domestic Routes | pexels
Earlier, in April 2019, 55.2 per cent of domestic routes were operated by a single airline but by April 2024, this figure had jumped to 69.2 percent.
This also means that nearly 7 out of 10 domestic routes are now served by only one airline, resulting in an increase of fare hikes.
Indian Aviation Industry - Challenges and Financial Struggles
Furthermore, the several major players in the industry have also faced several challenges in the recent few years such as the bankruptcy of Jet Airways in 2019.
Similarly, Go First in 2023, coupled with SpiceJet's substantial network reductions due to financial difficulties, have left the market dominated by a few major players, Business Standard reported.
Representative Image | Pexels
This also in contrast led to a consolidation of the market dominated by a few major players.
If seen in the latest development, by July 2024, budget carriers such as IndiGo and the Air India Group controlled over 90 percent of the domestic air passenger market, the report added.
How is it impacting the Airfares?
For instance, the Delhi-Mumbai route saw a 20.5 percent decline in average fares between April 2019 and April 2023. However, according to Business Standard, the latest fares on this route surged by 34.6 percent in just the past year.
Similarly, the Delhi-Bengaluru route has also seen a 53.1 per cent surge in economy fares over the last year alone.
This means, fewer competitors in the market have directly impacted airfares, particularly on high-traffic routes.
The fares on this route surged by 34.6 percent in just the past year | Representative Image/Pexels
According to the Business Standard report, this shift towards higher yields, measured as average revenue per passenger per kilometer, has resulted in fewer last-minute fare reductions, even on less popular flights.
For instance, during the long weekend of August 15 to 19, the airlines maintained high fares despite lower load factors, prioritising profitability over passenger volume.
