Post-pandemic airfare surge outpaces inflation despite volatile fuel costs

Indian air travellers are grappling with an uncomfortable reality — airfares have skyrocketed post-pandemic, far outpacing inflation and leaving frequent flyers and casual passengers alike feeling the pinch.

Despite the aviation sector's claims of recovering from COVID-19-induced losses, a closer look at Consumer Price Index (CPI) data reveals a stark and unsettling trend: ticket prices have not only rebounded but have surged well beyond pre-pandemic levels, even as fuel prices have shown signs of moderation.

This stark contrast between airfare hikes and fuel cost fluctuations raises serious questions about the underlying factors driving this relentless price escalation.

The CPI data paints a stark picture of how air ticket prices have escalated since the pandemic. Back in January 2014, the CPI overall was recorded at 113.6, while the airfare index stood higher at 126.8. Over the next few years, airfares consistently remained below the overall CPI, plummeting to a low of 70 in February 2020, just before the outbreak of COVID-19.

A report in the Hindustan Times reported that however, the onset of the pandemic marked a turning point, with airfares experiencing a sharp rise from June 2020 onward, peaking at 203.9.

Even after the second wave subsided, the airfare index remained elevated, recording 182.5 in May 2021. Fast forward to January 2025, and the CPI overall has reached 193.5, while the airfare index hovers at a steep 202.3, indicating a fundamental shift from pre-pandemic trends.

Interestingly, the surge in airfares does not entirely align with trends in Aviation Turbine Fuel (ATF) prices. Historically, both metrics moved in tandem, maintaining comparable values until the pandemic hit. In February 2020, ATF prices dropped sharply to 55.21 as demand plummeted. Despite a gradual rebound to 160.8 in June 2020, airfare CPI remained relatively stable.

After the second wave, airfares soared to 143.9 in May 2021 as travel demand recovered, while ATF prices fluctuated but remained high. Notably, when the Tata Group took over Air India, a period of relative stabilization followed, with airfare CPI at around 159.5 and ATF prices at 118.6 by January 2025.

The disconnect between ATF prices and airfares has left passengers questioning the rationale behind persistently high-ticket costs. While airlines often attribute fare hikes to rising fuel prices, the data indicates that other factors, such as increased travel demand and operational restructuring within the aviation sector, have played a more significant role.

A deeper look at Indigo’s operational expenses highlights the fluctuating share of fuel costs over the past decade. In 2014-15, fuel expenses accounted for a whopping 47.4 per cent of total costs, but this figure dipped to 35.6 per cent in 2015-16 and stabilised around 38 per cent in subsequent years. However, the COVID-19 pandemic brought an unprecedented drop, with fuel costs constituting just 18.3 per cent of total expenses in 2020-21.

As the sector rebounded, the share of fuel costs surged to 42.9 per cent in 2022-23, reflecting rising fuel prices and growing travel demand. By the December quarter of 2024-25, the share had moderated to 35.9 per cent, signalling a recalibration of operational expenses.

Yet, this moderation in fuel cost share has not been mirrored in ticket prices, which remain stubbornly high, indicating that the soaring airfares may not solely be attributed to fuel price volatility.

Further complicating the scenario is the trend in supply and demand in domestic air travel. Data from March 2015 to December 2024 reveals that both available seat kilometers (ASK) and passenger kilometers flown (PKF) exhibited consistent growth pre-pandemic, maintaining a balanced demand-supply equation. The pandemic, however, disrupted this equilibrium, with demand plummeting while supply gradually rebounded.

As of December 2024, ASK had surged to 48,227 million km, while PKF stood at 41,882 million km. Despite supply outpacing demand, airlines have maintained elevated ticket prices, sparking criticism from passengers and travel experts alike.

The current trend of skyrocketing airfares amid moderating fuel costs and ample seat availability raises questions about pricing strategies adopted by airlines. The data suggests that high fares are being maintained not just to offset fuel price fluctuations but also to capitalise on strong travel demand and industry restructuring.

While airlines argue that maintaining financial stability post-pandemic justifies the high fares, passengers remain unconvinced, grappling with the burden of exorbitant ticket prices despite signs of cost moderation. As the aviation sector continues to stabilise, a transparent and balanced fare structure will be crucial to restoring passenger confidence and ensuring sustainable growth.