How Airlines Determine Airfare: Behind the Price Surge

Aakhir Tak – In Shorts

Airfares during the Maha Kumbh festival to Prayagraj have skyrocketed, causing widespread outrage. Return tickets between Delhi and Prayagraj have quadrupled in price. However, high airfares are not unique to the Kumbh period; airfares in India remain persistently high throughout the year. The primary question among consumers is: How do airlines determine airfare prices? The DGCA (Directorate General of Civil Aviation) has stepped in to intervene and urged airlines to rationalize prices.

Aakhir Tak – In Depth

How Airline Fare Pricing Works in India
The rapid rise in airfare prices during special events like the Maha Kumbh has raised numerous questions among Indian travelers. While the increased demand for flights during events like Kumbh could justify price hikes, many critics argue that airlines are taking advantage of such occasions to excessively inflate prices. As seen with Delhi to Prayagraj return tickets soaring by 400%, there’s suspicion that airlines are profiteering from demand surges without substantial changes in operating costs.
Experts like Amitabh Tiwari suggest that the lack of a clear pricing formula or any transparency in fare determination is leading to these hikes. Despite the high ticket costs, airline service charges remain largely unaffected, raising doubts among consumers about the legitimacy of price escalations.

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Market Changes and Oligopoly
Recent years have witnessed significant changes in India’s aviation market. The privatization of Air India, the closure of GoAir, and the reduction of operations by SpiceJet have led to a monopolistic-like market. Today, only a handful of airlines control over 90% of the market share. This consolidation of power has resulted in higher ticket prices for consumers, who now have little to no option in selecting more affordable carriers.
Experts note that while high airfares are often attributed to supply-demand factors, the issue is compounded by the lack of competition among airlines.

Airline Profit-Making Strategies
Critics of India’s airline industry argue that the pricing structure in India reflects blatant profiteering, especially during peak periods like festivals. Unlike international destinations, where affordable flights are common, domestic airfares during these periods seem unreasonable. Prices surge not only around significant events but also during peak seasons like Diwali or summer holidays, making air travel less accessible for the average traveler.
Despite these complaints, there is no regulatory body with the authority to take action against airlines profiteering during such events.

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Comparing Domestic and International Fares
The stark contrast between domestic and international fares amplifies the complaints. For instance, flights from Bhubaneswar to Bangkok cost significantly less than flights from Bhubaneswar to Prayagraj, which highlights the market disparities. Critics argue that such pricing structures create an unfair competitive disadvantage for travelers in India.

Aakhir Tak – Key Takeaways to Remember

The lack of transparency in pricing leads to unfair airfare hikes during events like the Maha Kumbh.
Airlines have been accused of profiteering from demand surges during peak seasons.
India’s airline industry now operates in an oligopoly, pushing prices higher.
The need for government regulation and price monitoring is pressing.