Domestic airlines look to revive zero bag fares in order to grow traffic

Domestic airlines are preparing to offer lower fares for passengers without check-in bags in a move to improve seat occupancy and market share.

IndiGo chief executive officer Ronojoy Dutta indicated the airline’s interest to offer zero bag fares in an interaction with Bloomberg. Regulatory caps on fares and capacity related to Covid-19 have prevented IndiGo from taking a decision and the airline is discussing the issue with the government, he said. “We’re waiting for everything to settle down before we lock something,” Dutta said.

IndiGo’s rivals Go First and SpiceJet too are keen on offering zero bag fares, industry sources said. Go First is even looking to amend reservation systems to provide differential fares for those without check-in bags and hand bags weighing less than seven kg, one of the sources said. But a decision can’t be taken unless fare caps are removed, according to company executives.

While the Directorate General of Civil Aviation’s February circular on unbundling of services allowed airlines to offer zero bag fares, it came with a caveat. That is, these fares cannot be offered till fare caps remain in place.

The zero bag fares were first introduced in the country by SpiceJet in 2015 and was soon followed by other low-cost airlines. However, it was not a hit. Initially the discount offered in zero bag fare was only Rs 200. This also allowed other airlines to match prices and offer free baggage at the same price. The product also faced regulatory challenges on the issue of fees that an airline could charge in case a passenger (who purchased zero bag fare) came to the airport with check-in bags.

But with the intensifying competition and increasing cost pressures, airlines are looking at ways to unbundle services. Reviving the zero bag fare is one such option. Allowing airlines to charge for bags, seat selection, meals among others are ancillary revenue sources for airlines. Such fares would help airlines improve their revenues.

“Even now passenger load factors are around 70-80 per cent. The zero bag fare would help improve seat occupancy and help lure passengers by offering special fares. This could help in targeting corporates and same day return travellers,” an aviation industry executive said. It will work if the difference between zero bag fare and lowest normal fare is substantial, he added.

Domestic airline executives also pointed out that fares in India are among the lowest in the world, drawing comparisons with the US where airlines charge for carry-on bags. In India, airlines are required to provide 15 kg of check-in bags free.