How a 15% increase in airfare will affect air travel, tourism and hospitality

Are you planning to fly on vacation? Then you may have to shell out more from your pocket. Or are you going on a business trip? Then the length of your stay may be shortened.

Why? You ask. Because most of us are too restless to stay at home after the long travel restrictions during the pandemic.

That’s why. SpiceJet chief Ajay Singh on Thursday warned of an increase in airfare as jet fuel prices jumped nearly 16%. The price of aviation turbine fuel, or ATF for short, in Delhi has been raised to Rs 141,232.87 per kiloliter. Why are we telling you this particular number? Because this is a record.

On top of that, the depreciation of the rupee has doubled the trouble for airlines as major cost items such as fuel, maintenance, rent and overhaul costs are paid in US dollars. ATF prices represent 40 percent of an airline’s value and have risen nearly 55 percent since January 1.

Ajay Singh said the local airlines were left with no choice but to raise fares immediately, and that an increase of at least 10-15 percent was required.

But there is clearly a catch here. Airlines are concerned that any increase in fares could result in lower passenger numbers. With the previous two rounds of fare increases, passenger numbers have already dropped from 407,975 passengers on April 17 to 339,175 passengers on June 14.

The impact is being felt. IndiGo, the market leader, posted a loss of Rs 1,681 crore in the fourth quarter of fiscal 2022 as it was hit hard by rising jet fuel prices and an appreciation in the exchange rate.

The fates of airlines, travel and tourism, and the hospitality industry are intertwined. So, how will the upcoming tariff increase affect them?

This was told by Gaurav Patwari, vice president of Air at Cleartrip. standard business that in the last 2 months of the summer holiday season there was not much impact. But the impact is now more visible, he said, as bookings have slowed.

Meanwhile, luxury solo travel has become popular again, and companies catering to the niche segment are seeing demand that is higher than before the pandemic.

Demand is centered around exotic destinations such as the Arctic and Antarctica, as well as cruises and domestic road trips to Lahaul, the Spiti Valley and Ladakh. Another interesting format is road trips to foreign countries, such as Turkey, or trips along the routes of Jordan, Morocco, Oman and Kyrgyzstan. Wealthy clients in these cases may not be shaken by price movements.

Apparently, budget travelers will have a hard time. But higher airfare prices may not have a negative impact on the tourism and hospitality sector. However, it is worth asking the question: could this change if such increases coincide with price increases in the hotel sector as well?

Dear reader,

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