In its statement, the ministry said it had decided to permit scheduled airlines to unbundle certain services and charge for those separately. The move was based on the recommendations of Nathan Economic Consultants in its report ‘Economic Regulations to Airlines’ Ticket Pricing in India’. The report had batted for unbundling of services “since it has become a necessary aspect of exercising more control over operational costs and running a successful airline”.
The decision, coming within days of AirAsia applying for starting domestic services, could prove beneficial for the Malaysian low-cost airline, which relies heavily on ancillary revenue from luggage, meals, in-flight entertainment, preferred seats, etc, while keeping its base fare low.
The ministry’s decision facilitates airlines to offer low base fares for price-sensitive travellers, while offering choice to service seekers at a price. This will also allow airlines to develop more sustainable operations in an environment of wafer-thin margins.
Globally, it is a common practice to charge for extra services. IndiGo President Aditya Ghosh said: “This is a significant step, aligning India with the global airline industry practice of offering certain optional services on a payment over and above the tariff, taxes and surcharge, etc, that are common to all passengers. Our effort will be to provide a menu of service offerings to customers and let them choose enhanced services. Accordingly, an amount could be charged for their choices.”
Indian airlines, which at present allow up to 20 kg luggage to be carried without any extra charge, had been considering bringing the free-luggage limit down to 15 kg. It remains to be seen if they would completely do away with the free-luggage concept.
According to a survey by travel technological solutions company Amadeus, airlines around the world could have earned $36.1 billion in ancillary revenues in 2012.
Airlines can now charge passengers for
- Preferential seats
- Meal/snack/drinks (except drinking water)
- Use of airlines’ lounges
- Check-in baggage, sports equipment carriage, musical instruments
- Carriage and fee for special declaration of valuable baggage