How Maturity In Aviation Market Leads To Cheap Air Tickets Becoming Dearer?

There is no dearth of statistical evidence which shows that the low-cost carriers, the LCCs, cannot maintain low prices for their cheap air tickets for all times. In the beginning, when the market is not yet fully developed, there are not many competitors in the market and there is scope for cutting down on prices as competition rises. However, with the development of the market and the entry of optimal number of players, there is a bridging of the demand and the supply, which leads to less scope for maneuverability in offering cheap international flights.

This is what is happening in Europe where the LCCs, operating on short-haul segments, find that the prices cannot go down forever. With most of the route segments already being served by an optimal number of players, there is not much space of expansion for LCCs and this bridles their growth. Add to it an escalation of the price of the fuel and it becomes inevitable for the airlines to increase the prices of tickets. Maturity of market is also dependent on the size of the country. So, smaller countries of Europe (land and population wise) are likely to attain maturity quickly as compared with the big countries (land and population wise) such as India.

While this is the impact of maturity of markets on the increasing prices of the LCC tickets, the network carriers, too, have their own impact on the air ticket prices. By virtue of their scope of operations and a number of value added services provided to the customers, these are able to absorb the increase in fuel price much better than the LCCs and therefore, might not increase their prices proportionately. Further, if the network carriers adopt a considered approach to reduce prices on the lines of LCCs, there is a further lowering of the price gap between their price and the LCC tickets.

This trend of reduction in the gap between the tickets prices of network carriers and LCCs offering short-haul international flights is quite noticeable in Europe and America and the same has been largely attributed to the markets attaining maturity.