The aviation industry in India has been booming recently with demand for travel surging, however, the airlines are still struggling to increase their fares. Official data from the International Air Transport Association (IATA) revealed that domestic flight prices majorly remained stagnant, often reaching close to or even below 2025 levels.
The data showed that airfares have not been able to keep up with the increasing operational costs, such as higher jet fuel prices and inflation, reported The Economic Times. This difference between the demand for air travel and stagnant airfares is striking. Air passenger traffic has increased by more than 62 per cent since 2015, indicating the expansion of India’s middle class and improvement in air connectivity.
However, airlines have not been able to tap into this demand by majorly increasing their fares. The fare hike seen in 2023 was a temporary correction, the report noted. This surge was attributed to a rebound in travel after the Covid-19 pandemic. As the airlines returned to normal operations, they were not able to match their fares to inflation or rising costs.
The report noted that intense competition in the market has prevented Indian carriers from hiking their fares. Industry executives said that even slight price increases invite undercutting by competitors.
After market consolidation, IndiGo and Air India now control majority of the domestic market and handle nine out of 10 domestic passengers.
Typically, airline consolidation often results in reduced fares and greater efficiency, however, these benefits have not materialised in India.
Further, the government’s push for regional global routes is estimated to add more pressure. Over the next five years, the carriers are expected to deploy more than 250 new aircraft, majorly increasing competition on domestic and regional routes.