Cheap Air Tickets: The Road Ahead For Indian Aviation

Just how much can cheap air tickets go cheaper further? This is one question which has many answers. While some would point out the already rock-bottom prices which the airlines are hitting and are somehow sustaining in this competitive market, some would suggest that there is still much scope left in tapping the market potential. And, as is the natural expectation, as the market potential is to be realised, there is a chance that the prices will come down further.

IATA studies on the aviation sector in India have identified that there is a potential of creating a market of around 700 million air travellers, if there is an increase in the frequency of air travellers in India. The realisation of this potential would require the massive development of infrastructure, addition of capacities and having a re-look at the taxation aspects. The prevalence of high rates of taxation on the aviation fuel has been one of the major impediments in the way of airlines in offering cheap international flights as well as further lowering the prices on domestic air tickets.

Taxes do play an important part in the cost of operation of airlines. The global average is 32 percent of the total cost, while for India this average is about 45 percent. Considering that the jet fuel prices make for almost half of the operational costs of the airlines, it becomes the single most important head of expense which can make an impact on the cost of air tickets. In India, there is an excise duty of 8.24 percent on all jet fuel and the different states impose their own fuel taxes, to the extent of up to 30 percent.  The high taxation rates are seriously hampering the players in the domestic aviation sector, many of which also operate the international flights.

Next, the lethargic pace at which the infrastructure development is happening is adversely affecting the speed with which the market potential can be realised. Further, the way the expenses incurred in the development of infrastructure are sought to be dispersed over a period of only two years, is going to make airlines operations at the airports a lot more costly.

Thus, there is no denying the fact that there is a scope for the further reduction of prices of the present cheap air tickets provided that the efforts are made to realise the market potential, be pragmatic in approach for distributing expenses over a number of years and there is a lowering of the taxes on aviation fuel.