Current Scenario

Rupee value depreciation leading to increased input cost. Selling tickets at lowest price levels in the past two years Because of fear of low demand airlines refraining from increasing the price even during season

 Supply is more than demand as there is an economic downturn. Increase in input cost but no option of increasing the price of tickets as demand is already low.

 Ideally the company decreases supply to increase the demand when it has excess supply and reach the equilibrium in the market. Here supply cannot be decreased as input cost has already gone up. Hence the companies are in a dilemma to decide on their future strategy.

Consumer Surplus
Most companies are focussed on catering the lowprice segment . Low price so customers will be spending less than what they expect to spend for a particular journey. Leading to increased consumer surplus.

Producer Surplus
Even under such bad market conditions proper management can increase the producer surplus by focusing on operations.

Price elastic demand

Price elasticity=(%change in demand)/(%change in price) Many players in the industry so increase in price leads to fall in demand. So Price elasticity >1. So increase in price leading to decrease in revenue.