India is famous for its cheaper than average services. From the IT industry to coffee shops, you can usually get anything from the West at a lower price without a drop in quality. Funnily enough, the one industry that is almost guaranteed to provide a similar service across the globe is where Indian providers charge more than the West. Why is it that Indian airfares are so much more expensive than their European counterparts?
To find out, we returned to financial expert Deepak Shenoy in the latest episode of The Capitalmind Show. If you book a flight early enough, you can find international airfares as low as €10 (Rs. 796) in Europe. In India, you would be lucky to pay just that amount on taxes for a domestic flight of half the distance. Why is there such a discrepancy, and can we see that difference come down in the future?
The problem tends to come down to hidden costs. While the price of the ticket itself is usually similar to their European counterparts, taxes, airport charges, and other surcharges leave Indian airfares soaring above the rest. This is partially because Europe has an overabundance of airports that can be used, whereas in India the infrastructure is still lacking. Many large towns still only have domestic airports – if they are lucky enough to have one at all!
Additionally, there is a problem of profit-making in India. While European airlines tend to break even with a lower passenger count – leaving them more room to manoeuver prices on leftover seats – Shenoy estimates that Indian airlines only make their money back once a plane is at 95% capacity or higher. That does not leave much room for last-minute ticket sales.
You can also listen to the podcast of this video here.
Header Image: Unsplash/Nick Herasimenka