Airfares set to drop in last quarter of 2020, say experts

As capacity increases, the current level of prices would cause demand to lag behind supply. Fares are, therefore, likely to go down

  
Close up of a man holing airplane ticket. Image used for illustrative purpose.

Close up of a man holing airplane ticket. Image used for illustrative purpose.

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Airfares, which have seen an increase as airlines tackle the economic impact of Covid-19, will likely see a drop in the last quarter of the year, experts said.

Speaking to Khaleej Times, Neeraj Goswami, associate director of Air Business at Cleartrip, explained that airlines have been carrying fewer passengers per plane than before in order to adhere to social distancing norms. This has resulted in them charging a higher ticket price per passenger.

"There are also additional costs of airport procedures that airlines have had to pass on to customers, so ticket prices have unfortunately gone up as a result," he said. "There is also a huge pent-up demand with limited supply now, so airlines can afford to sustain high prices without adversely affecting flight loads."

Over the next few months, as more capacity comes in, the current level of prices would cause demand to lag behind supply, he said. "Hence, prices will fall and airlines will find other pockets of efficiency to maintain margins. Price wars that were common on certain routes will become less frequent. We think prices will go down over the next 3-4 months, but they'll probably stay higher than they were 12-18 months ago."

Lakshmi Anand, manager of Travel & Tours at International Travel Services - Galadari Group, said that ever since the lockdown began, airlines have come forward and been more considerate in extending the validity of airline tickets.

"This offers travellers, who could not travel during the March-June period, a chance to plan their trips in the upcoming months with minimal additional charges," she said. "The hike on airfares is yet to be confirmed, as fares are not yet finalised and will change based on the demands of each sector. Until international borders are completely open, repatriation tickets are indeed priced higher than the normal ticket value since they are mainly issued as one-way."

Similarly, Shaik Shibli, head of Marketing at ITL World, said that it will take time for airfares to return to what they were before the lockdown.

"We have all read and seen reports of a few airlines going through a lot of turbulence from internal issues to financial restructuring, and some even filing for bankruptcy," he said. "Others in the interim will scale up to fill the void. The rightsizing of supply and demand may take time, leading perhaps to a higher pricing in the medium-term. This is quite typical when the airline industry emerges from an economic downturn, and the tendency then is to offer attractive airfares to stimulate demand."

Highlighting how Dubai recently opened up for international travellers, Mehar Sawlani, director of Sales at Richmond Gulf Tourism, said: "It is really fantastic that more destinations are opening - it will be great for the entire economy. The UAE is doing a superb job and has already started welcoming tourists. If all countries follow the way that the UAE has taken care of its residents and visitors, we are sure that everything will bounce back to normal very soon."

"We truly believe that airlines are working hard to keep the air fares low, so that travellers can fly, but we do need to keep in mind that it is a very tough period for the aviation industry," she added.

Asked if residents putting off their vacation plans for the summer will have a long-term impact on the industry, she explained that this will result in an increase in domestic travel in each and every country, since travellers feel safer about travelling within their own country.

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