The Civil Aviation ministry’s decision to allow airlines to “unbundle” their fares and add extra charges for “services” like preferred seating has created an uncertain situation for fliers who have already been battling with the lack of transparency and consistency in ticket pricing. Soon after the ministry announced its new policy, many airlines rushed to cash in on the opportunity. Some of them started with front and exit row seats but others sought to levy a premium for all window and aisle seats too. So far, only Air India and SpiceJet have refrained from milking this opportunity to raise additional revenue from preferred seating, though the national carrier has lowered the free baggage allowance from 20 to 15 kilos. Now, after seeing the public outrage over the decision to charge passengers for where they would like to sit, the ministry has set a ceiling of 15 per cent for the number of seats on which airlines can charge a premium fee. When implemented, this move will allow airlines to raise fares on seats that are clearly ‘premium’ — essentially those that provide extra leg space or quicker egress — while at the same time ensuring that passengers unwilling to pay extra are not left with only middle seats. The lower baggage allowance will, however, continue to cause distress at the check-in counters.

The structure of airfares today remains dynamic to an extent, but seems driven by competition and the need to ensure a minimum passenger load factor. There are heavy-density routes that command a higher fare, and the less congested services where the fares have to be concessional to attract traffic. With many of the private airlines that were operating when the open skies policy was implemented folding up in due course, and even Paramount Airways and Kingfisher Airlines suspended, the field has narrowed considerably. Air Deccan, a pioneer in low-cost, no-frills airlines, wound up too, and the kind of fares it once offered could not be dreamed of anymore. Fortunately for passengers, the aviation ministry and the regulator have made sure the airlines do not operate as a cartel or start putting up fares unreasonably during the peak season. To compensate the airlines in a way, and open up a window for them to mop up additional revenue, the government decided to permit them to charge more for preferred seats, additional baggage, and meals on flights. But given the profit motive of private enterprise, the manner in which this window is utilised will have to be carefully monitored and regulated.


For Indian carriers, season of new hopeMay 25, 2013

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