Fares for summer flights to India from Oman spike despite low crude prices

Oman Saturday 27/February/2016 22:05 PM
By: Times News Service
Fares for summer flights to India from Oman spike despite low crude prices

Muscat: Oil prices have been low since mid-2014 but the air fares for south Indian destinations for summer from the region continue to skyrocket as usual, digging a deep hole in Indians’ pocket.
A research by the Times of Oman found that a to-and-fro ticket to Thiruvananthapuram, the capital city of south Indian state of Kerala, was costing between OMR300 and OMR385 from Muscat during the summer. This is the time when majority of them will be flying home as schools close for vacation at that time.
“Last year, when the ticket prices were high during the peak season, the airlines said that the dip in oil price has not helped them since they had purchased fuel much in advance when the prices were high. They assured that ticket fares will come down gradually. However, that has still not happened. Prices are the same as these were last summer,” a travel agent representative said on condition of anonymity.
To fly on July 1 to Thiruvananthapuram from Muscat and return on July 30 from the same destination to Muscat, it will cost around OMR384 via Oman Air and OMR364 via Jet Airways.
Oman Air and Jet Airways are the only two airlines which fly direct between Muscat and Thiruvananthapuram.
“All airlines practice some degree of price differentiation for seats on their flights. During low season, airlines seek to stimulate demand by discounting fares. During high season, airlines tend not to discount fares but to charge normal rates for travel,” a top official from Oman Air said.
Even a random check on airfares from Dubai to Thiruvananthapuram reveals that the cost of a ticket ranges between OMR250 and OMR380.
On Etihad, a return ticket to Thiruvananthapuram from Dubai will cost around OMR373, while on Emirates, it will be around OMR267. On Oman Air, it will be around OMR297.
A ticket during the low season to Thiruvananthapuram will cost around OMR120 from Muscat and Dubai.
“During low season, we fly at low rates. However, as this is a business, we have to increase the rates when demand is high. When other airlines are having high fares, we also are forced to have similar fares. It is purely business. Demand and supply theory matters,” said Riyaz Kuttery, general manager, Oman, Jet Airways.
An official from Air India office in Muscat said apart from aviation fuel prices, other factors are also involved in fixing the airfares.
“Peak season fares help the airlines to compensate for the loss they incur in flying at low rates during off season,” the official added.
According to airline industry experts, jet fuel can account for between 20 and 50 per cent of an airline’s operating costs. Swings in oil prices can mean a huge boost or hit for the airlines’ profits.
Air India’s director of finance S Venkat said there were reports that the airline, for instance, which goes largely unhedged could have shaved as much as $375 million off its annual fuel costs of about $1.5 billion based on savings made since prices started to fall in June 2014.
“Still, Air India is starting to consider hedging between 30 and 40 per cent of its fuel needs, or about 300,000 barrels a quarter at current jet fuel prices,” the report added.
In December, the International Air Transport Association (IATA) said lower fuel prices could mean that airlines globally will report their strongest profit margins in more than five years in 2015.
Airlines typically hedge some of their fuel needs - or buy fuel in advance at pre-determined prices - to reduce the impact on earnings from wide swings in the market.
But many carriers, particularly in Asia, have been cautious about hedging since 2008, when airlines scrambled to lock in fuel costs as crude surged above $100 a barrel for the first time and saw oil plummet to less than $40 before year-end.
According to customers, flying to south Indian destinations through other Indian cities and other airports is the only option to deal with high fare tickets.
“However, the saddest part is that tickets on ‘via routes’ are also not available and the fares on those flights are also too high. Airlines are looting the people. Last year, they said the dip in oil prices will reflect in the ticket prices this year. However, it seems that has not happened. At least, Indian airlines should not loot their own citizens,” Shameer PTK, an Indian social worker, said.
“Due to the economic downturn, many companies are paying airfares to expatriates in instalments and are also pushing them to postpone their travel dates to low season. As Indian schools close for summer vacation during June, July and August, everyone would love to fly to India. Indians, especially those from south Indian states, are in a dilemma,” Shameer added.
Meanwhile, according to the International Air Transport Association (IATA), demand for air travel in 2015 had surged in the last five years.
“Global passenger traffic results for 2015 showed that demand (revenue passenger kilometers or RPKs) rose 6.5 per cent for the full year, compared to 2014. This was the highest since the post-global financial crisis rebound in 2010 and well above the 10-year average annual growth rate of 5.5 per cent,” IATA announced in a recent statement.
“While economic fundamentals were weaker in 2015 compared to 2014, passenger demand was boosted by lower airfares,” the statement added.
According to IATA, Middle East carriers had the strongest annual traffic growth at 10.5 per cent.