With domestic airlines stepping up their security measures against the novel coronavirus, their operating cost is set to rise, according to Bhaskar Bhat, chairman of one of India’s leading aviation firms, Vistara. This will force airlines to increase ticket prices.
“Flying is not only cheaper but the quickest mode of travel. It has also become a status symbol. When people buy a ticket for a train journey and it gets late, they accept that and don’t create much fuss, but if a flight gets delayed then they get angry. It’s because the expectation from our services is different. So they know they are paying for that,” Bhat said during a webinar organised by the Indo-American Chamber of Commerce on June 5.
Fearing this price increase, on May 25 when the Indian aviation sector was reopened after two months, the government set limits on airfares for different routes.
Even once the government removes these caps after three months, airlines may not be able to raise prices as much as they would want to given the stiff competition in the sector, Bhat said. So companies must find new means of making a profit. “The current crisis will force firms to come up with new business strategies to make money. If they fail to do so then they may need to exit the industry,” he said.
The Covid-19 slump has made things worse for India’s aviation industry, which was already struggling with low passengers and rising costs. For instance, India’s largest carrier IndiGo posted a consolidated loss of Rs871 crore ($115 million) for the quarter ended March 31.
However, there is a silver lining for aviation firms in the post-Covid-19 world.
Since May 25, flight occupancy on domestic routes has been around 70% as against the expected 25%, Bhat said. This is in line with analysts’ expectations that commuters will prefer flights over other means of long-distance travel as it is seen much safer.