Why Are Domestic Flights in India So Expensive?

Believe it or not, a flight from Delhi to Jaisalmer now costs more than a flight from Delhi to Dubai. The issue has become so serious that MP Raghav Chadha raised it in the Rajya Sabha.

In the past 1.5 years, domestic flight prices have increased by up to 40% on several routes. Let’s break down the reasons behind this sharp rise.

1. Shortage of Airplanes

One major reason is that there simply aren’t enough airplanes available in India.

• Currently, Indian airlines operate around 700 planes.
• According to Boeing, India will need 2,800 planes over the next 20 years.
• Indian airlines have already ordered 1,700 new planes, but deliveries are delayed.

Why the delays?

• Manufacturers like Boeing and Airbus are facing production issues.
• There are shortages of essential components such as engines, electronics, and rare metals.
• A lack of skilled workers is slowing down production.
• Problems at Boeing, including a serious door failure on an Alaska Airlines flight, have added to the crisis.
• The Russia-Ukraine war disrupted global supply of materials like Titanium, Neon, and Palladium, which are key to aircraft production.

As a result, airlines cannot expand their fleets quickly enough to meet growing demand.

2. Limited Competition in the Market

In the last decade, several major airlines like Kingfisher, Jet Airways, and Go First have shut down.

Now, only IndiGo and Air India dominate the market, controlling about 90% of domestic air traffic.

• Out of 1,100 domestic routes, around 500 routes are served by just one airline.
• Fewer choices mean higher prices, and passengers have little bargaining power.

3. Unequal Focus on Metro Cities

Airlines prefer routes between major metro cities like Delhi–Mumbai or Bangalore–Hyderabad because they are more profitable.

In smaller towns and cities like Jaisalmer:

• Very few flights operate.
• Airlines often charge high fares to recover their costs due to low passenger numbers.
• Limited competition makes the problem worse.

4. High Fuel Costs and Taxes

A large portion of your airfare comes from the cost of Aviation Turbine Fuel (ATF), which powers the aircraft.

• ATF accounts for around 40% of an airline’s operating cost.
• After 2021, ATF prices have sharply increased, especially after the Ukraine war.
• In India, one kiloliter of ATF now costs about ₹1 lakh.

Why is ATF so expensive in India?

Because of high taxation:

• The central government charges excise duty.
• The state governments charge VAT.
• ATF is not covered under GST, so airlines do not get input credit, making operations more expensive.

Even NITI Aayog has recommended moving ATF under GST, following global standards.

5. What Can Be Done?

Here are a few solutions that can help bring flight prices down:

a) Encourage More Airlines

• Make it easier for new airlines to enter the market.
• Simplify licensing and reduce excessive regulations.
• Provide temporary support or route reservations for small or new players.

b) Support Aircraft Leasing

• About 80% of Indian aircraft are leased.
• Leasing is expensive due to high interest rates and foreign exchange risks.
• The government has set up a leasing hub in GIFT City, Gujarat, offering tax breaks and better leasing terms.

c) Reduce Taxes on Fuel

• Replace excise duty and VAT with GST on ATF.
• This would lower the fuel cost for airlines and reduce ticket prices for passengers.

6. Why Isn’t GST Being Applied?

Bringing ATF under GST requires coordination between the central and state governments. Since ATF is a state subject, both sides need to agree, which makes it complex.

However, since the central government (BJP) controls many states, this change is possible if there is political will.

Conclusion

Flying within India has become more expensive than flying abroad due to:

• Shortage of aircraft
• Lack of market competition
• High taxes on aviation fuel
• Airlines avoiding smaller cities

To make flying affordable again, we need to increase competition, reduce fuel taxes, and fix supply chain issues. Otherwise, people may continue choosing international destinations like Dubai over domestic ones like Jaisalmer, simply because it’s cheaper.

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