Airlines get free hand to charge on additional facilities

Unbundling of services and charges thereto has the potential to make basic fare more affordable and provides consumer an option of paying for the services, DGCA said

Air passengers will have to shell out more for availing facilities such as preferred seats and use of lounges with Directorate General of Civil Aviation (DGCA) giving a free hand to the carriers to charge on these counts, in a move to push up their ancillary revenue.

The DGCA had in April 2013 unbundled these services, allowing the airlines to charge for such facilities, but a month later restricted the number of preferred seats for pre-booking at 25 per cent of the overall capacity on domestic flights.

Unbundling of services and charges thereto has the potential to make basic fare more affordable and provides consumer an option of paying for the services which one wishes to avail, the DGCA said in a recent circular on air transport.

On the basis of various feedback received, it is felt that many a times these services provided by the airlines may not be required by the passengers while travelling, it said.

Ancillary revenue is the one which airlines generate any means other than the ticket price.

The services unbundled include preferential seating, meal/snacks/ drink charges (except drinking water),charges for using lounges, check-in baggage charges, sports equipment charges among others, it said.

From May 2013, carriers like Air India, GoAir and IndiGo, who had started charging from their customers for such facilities following DGCA's unbundling orders, stopped the practice.

The practice of charging for such facilities was launched in 2008 by some US carriers which were facing financial crunch.

Noting that ancillary revenues are expected to be a key focus for low-cost carriers in FY 2015, aviation think-tank CAPA in a report late last year had said, "To date Indian carriers have tread softly with respect to unbundling, partly because of regulatory restrictions and partly due to a reluctance to make the first move."

But strong ancillary revenues will be necessary to support a low base fare pricing strategy, it had said, adding "CAPA anticipates that regulations will be eased significantly over the next few months... By the end of FY 2015, LCCs are likely to be generating ancillary revenue right across the value chain.