The Jet Effect: Higher Fares Here to Stay

The shutting down of the full-service airline in April may have provided other airlines the opportunity they needed to finally improve margins

- Manu Balachandran

Two years ago, India’s aviation sector was at a high. As crude oil prices hit rock bottom, India’s cash-strapped airlines found a lifeline, posting profits quarter after quarter. The now defunct Jet Airways posted an annual net profit of `1,173 crore in financial year 2016, while cash-starved national carrier Air India too declared operating profits for the first time in nine years. The government embarked on a new civil aviation policy to kick-start regional connectivity and make air travel more affordable and widespread.

Two years down the line, the industry is in the doldrums. Jet Airways has shut down, Air India couldn’t find any buyers when the government sought to sell it, IndiGo is facing disputes among its promoters, and the government’s ambitious regional connectivity scheme is yet to gather momentum. All this is in addition to the high costs and lower yields that have plagued the industry for decades.

The biggest shock came in May, when data showed that the overall domestic passenger traffic between January and April 2019 grew at only 2.5 percent, significantly lower than the 24.6 percent growth in the corresponding period last year. Between this January and March, India’s airlines carried a total of 464.47 lakh passengers compared to 453.03 lakh in the corresponding period last year.

“What is happening in the aviation sector is a man-made mess,” says Jitendra Bhargava, a former executive director of Air India. “We can’t have a situation where an airline goes bust every four or five years. There has to be rationalisation in terms of fares to make the business more viable. It’s often difficult to raise fares, but that’s the only sustainable model.”