Low fares, domestic tourism fuel air travel demand


India is the fastest growing aviation market in the world, with air traffic growing at 20% year-on-year. The scorching pace of growth is being driven by a number of factors ranging from low fares, rising demand from tier II cities and steady growth in domestic tourism.

Domestic airlines in India flew 81 million passengers in 2015. And next year, 100 million passengers are expected to travel within India, reports Business Standard.

Improved business sentiment coupled with lower fares is driving demand for air travel. Aided by 24% reduction in jet fuel prices on a year-on-year basis average air fares on domestic routes fell 14% to around Rs 4,500.

This led to spurt in demand from leisure and small and medium enterprises (SME) segment and overall industry wide occupancy rose to 82.5% in 2015 as against 76.4% in 2014.

Analysts expect fares to remain range bound in 2016 due to a mix of lower crude price and an increase in domestic capacity and see market leader IndiGo as the biggest beneficiary due to its lower operating costs and fleet expansion plans. Aviation consultancy CAPA’s South Asia CEO Kapil Kaul expects IndiGo to outperform the market once again and estimates IndiGo and GoAir to add 30 aircraft amongst themselves in FY17.


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