Spot Airfares To Rise By Up To 25% On Boeing 737 Max Aircraft Grounding

As the Directorate General of Civil Aviation (DGCA) has grounded the Boeing 737 Max aircraft with effect from Wednesday due to the recent crash of a 737 MAX plane of Ethiopian Airlines, nearly 20% fleet of India's major airlines including Indigo, Spicejet and Jet Airways is off skies. This results in a shortage of 114 planes for the aviation industry that commands a total fleet size of 585, which surely will push up spot airfares by up to 25% in the short term.

Further, as the ban on Boeing 737 Max is unlikely to be lifted soon plus financial crisis at Jet Airways is all pervasive, the problem of capacity shortage is likely to stay, creating long-term trouble for the industry.

Earlier also airlines across the industry like GoAir, Jet Airways, Air India and Indigo had been grounding their planes due to reasons including shortage of pilots, financial crisis or technical problems. For instance, Indigo facing scarcity of pilots has been cancelling 30 flights on a daily basis, Jet Airways' 50% of the fleet has been grounded due to non-payment of dues to lessors.

In its meeting with the air-carriers on Wednesday evening, civil aviation secretary, PS Kharola however said that the airlines have given their consensus to not engage in predatory pricing. Further, Spicejet will accommodate most of the flyers in its own flights and if the need arises, other carriers may come forth.

"The fares have already gone up by 15% (year-on-year) since the beginning of the year. If you put the total capacity being taken out from the market in conjunction with the high load factor of about 80-90% there is no way the airlines can absorb this short-term excess capacity deficit and an increase in fares is therefore imminent," said Sharat Dhall, chief operating officer, Yatra Online, an online travel search engine and booking agency.

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