Ever since the pandemic, there has been undeniable turbulence in the air as well as in your wallet! Recently, they have escalated even more. Why? You may ask. Because of sky-touching prices of flight tickets. As we gaze at the rising costs with furrowed brows, it’s natural to wonder what’s driving this sky-high phenomenon. In India, flights are considered as the most luxurious form of transportation. All thanks to the crazy whopping prices of air tickets that are adding pearls to the luxury. Why are flight tickets getting expensive? Are airlines engaging in secret conspiracies to drain our pockets, or is there a more logical explanation?
Let’s dive in and unravel the mystery of soaring prices of flight today.
General Cost Segments of Airlines
Weren’t we discussing the prices of flight tickets? Yes, it is true. Then why are we discussing the general cost segment of Airlines out of nowhere? Probably your mind will be full of queries like this. See, the cost of the ticket is the ultimate source of income for the airlines. So, to know the root cause of- “Why Fight tickets are getting expensive?” You must know the basic factors that determine the cost of the airline’s operation that ultimately impacts the ticket price.
|Factor||Description||Percentage of Total Cost (%)|
|Labor Force||It includes salaries, benefits, maintenance, and training costs of pilots, cabin crew, engineers, etc.||30-40%|
|Fuel||The cost of ATF (Aviation Turbine Fuel) is a major expense for airlines. However, it fluctuates as per the global oil prices||25-30%|
|Airport Fees||Airlines pay for landing fees, terminal costs, and other charges related to the airport||15%|
|Aircraft Maintenance & Depreciation||The cost of maintaining the aircraft increases as its value declines over the plane’s life||15%|
|Taxes & Regulatory Fees||Airlines have to pay all the taxes imposed by local & national govt., international regulatory bodies, etc.||10%|
|In-flight Services||Involves the cost of meals, beverages, and other in-flight services.||5%|
Can you guess from where the airlines manage the cost of the services and charges mentioned in the above table? From your flight ticket! Yes, the flight ticket that is bleeding your wallet.
So, if any circumstances deteriorate the above factors, the price of the flight ticket automatically increases. In the next section, we will discuss the major underlying reasons for the query- “Why are flight tickets getting expensive?”
Major Reasons for Hiked Flight Ticket Prices in India
When it comes to the reasons for sky-soaring prices of tickets, the reasons are more or less similar for all the airlines across the world. However, there are a few reasons that specifically implies the rise of flight ticket prices in India. What is it? You will get to know it once you go through the following points-
1. “Go First” Airline Insolvency Case
When you look for the reasons for the soaring prices of air tickets globally, you will find many. But when it comes to the chief reason for the sharp rise in airfare in India, the primary reason is the insolvency of the “Go First” Airline. On 2nd May 2023, “Go First” announced its insolvency, voluntarily though. Thereafter, it didn’t operate a single flight. Two months ago i.e. April 2023, this Wadia group airline used to ferry approx. 8.3 lakh flyers. Also, it held a domestic market share of 6%. The insolvency and the sudden disappearance of Go First’s capacity from the aviation market was the last nail in the coffin. The routes that possessed a strong presence of Go First had the greatest demand and supply gap.
Think about the passengers whose tickets were canceled due to this insolvency case. They were left with no choice but to seek alternate flights. So the Go First’s passengers turned to two aviation titans of India, namely- IndiGo and SpiceJet. They were already facing capacity constraints due to a shortage of aircraft (We will explain it in the upcoming sections). Go First’s passengers contributed to the rush of passengers that ultimately led to the rise in air ticket prices. Go First was a sizable player in the Indian aviation industry. Therefore, its slump led to a huge mismatch in the demand-supply of flights.
2. Rise in ATF Prices
The price of crude oil comes down once in a blue moon. Aviation Turbine Fuel (ATF) constitutes around 25-40% of the operational cost of the airlines. Do you know that ATF had reached the sky in the last 3 years? As per the data provided by Indian Oil Corporation (IOC), our largest fuel retailer, the price of jet fuels is Rs.89,303.09 per kiloliter. If you compare it with that of March 2020 and June 2019, you will notice that the current price is higher by 57% and 37.4% respectively. Thus, due to the escalation cost of fuel, airfares have been rising at a sharp 30-40% across domestic as well as international routes.
As per the aviation industry officials, the prices are hiked exponentially in the sky route that connects major cities like-
- Andaman & Nicobar
Also, the geopolitical tensions due to the Russia-Ukraine war were responsible for the ATF price hike since last year.
3. Travelers Are Willing to Shell Out More Money
Due to the above two reasons, the price of tickets is already soaring high. Imagine a scenario where you are fighting to bring down the price of air tickets but others are willing to shell out as much money as the airline declares! Do you think you can put an impact on ticket prices when others are paying the heavy prices willingly? Quite a disappointing situation. Isn’t it? As per the preliminary data of the industry, there were over 1.3 crore domestic flyers in May. This was much higher than the pre-pandemic levels. And an interesting fact was- those flyers were fine with high ticket prices. Maybe spending on traveling and vacation was their priority over ticket prices. This encouraged the airlines to hike up the price more and more!
But you see, not every passenger on the plane is a tourist or a traveler. Tourists are okay with price hikes because they go on vacation hardly once or twice a year. But what about others who need to travel weekly? Some need to go on business trips for deals and others have to go to work. Unlike tourists, those who travel frequently from one city to another face the severe impact of soaring air ticket prices.
Other Generic Reasons for Escalated Airfares
Apart from the above reasons, many other causes led to escalated air-ticket prices all around the world.
1. Shortage of Staff
Look at the table once again. Can you tell who the major shareholder of the Airlines’ cost segment is? It is none other than the “Labor Force.” So how is it related to the ticket prices? It’s a long story. Let me explain it simply. During the Covid-19 pandemic, flights were shut down for nearly 2 months. Result? Airlines faced a whopping loss of $200 billion. It impacted the employees because airlines have to pay wages to them and this share is 30%.
To tackle those losses, over 10 million aviation jobs were cut through massive layoffs. The majority of the well-trained workers switched their careers to more stable jobs. As the lockdowns and restrictions became lenient, those layoffs emerged as a huge setback for the airlines.
As a result, there was a huge shortage of employees who work at airport check-in desks, immigration counters, and baggage carousels. Airlines toiled hard to retain the currently deployed staff by offering high salaries. Couldn’t the airlines recruit new personnel? Yes, it is recruiting but recruiting staff is not as easy as firing them off! You need to select the candidates, train them, and test them. All of it is a time-consuming process.
So the high salaries that the staff of airlines get, comes directly through the price you give for the plane ticket. Thus, the shortage of staff translates into expensive airfares!
2. Shortage of Aircrafts
In Go First’s insolvency case, you read about the fact that Indigo and other airlines were facing a shortage of aircraft. Do you know why? Because during the pandemic, over 16,000 aircraft were grounded due to restrictions on travel and low demand for flights. Many Indian aircraft were grounded too! Can you guess where those aircraft were kept during that time? In deserts! Really? Yes. Because aircraft are susceptible to wear and tear in deserts. But no matter how much you protect a mechanical & electronics giant, it would suffer damage if not used regularly. So, those grounded aircraft suffered from major issues like damaged interiors and engines.
Why didn’t they repair those aircraft? You may ask. The repairing process is going on but again the aircraft manufacturers are facing shortages in labor. Also, due to sanctions in Russia, it is difficult for them to secure raw materials like Titanium exotic metal alloys, and coatings. These materials make up the basic parts of Aircraft engines, turbines, etc., and are available only in certain places.
By now you have realized the chief reasons behind the 10X rise in flight ticket prices in India. So, what can be done to stabilize the situation? Although tourists are ready to pay the high prices, what about those who can’t afford sky-high prices for a short domestic flight? Well, the price stability, as well as affordability in the longer term, will depend on numerous factors. Such as travel demand trajectory and stabilization of ATF (jet fuel) price. The pace of capacity addition by airlines to take masses in a single flight can also act as a significant step to reduce the airfare price. Also, the Indian government has taken note of “abnormal surge pricing on certain routes.” It asked airlines to self-monitor the prices. It devised a mechanism to ensure reasonable pricing on domestic & international routes.
Let’s hope that the prices of flight tickets in India will touch the ground soon!