Industry

‘Govt. must allow airlines commercial freedom’

Indian carriers can make an incremental $400 mn a year if they offer zero baggage fares, says CAPA. Prashant Nakwe

Indian carriers can make an incremental $400 mn a year if they offer zero baggage fares, says CAPA. Prashant Nakwe  

India risks survival of carriers if curbs remain, says CAPA

The government must cease to control commercial decisions of India’s airlines to ensure their survival following the financial setbacks caused by the air travel restrictions necessitated by the COVID-19 pandemic, aviation consultancy CAPA India warned on Monday.

“Allowing complete commercial freedom is a must for the revival of airlines in India. No other major aviation market in the world imposes such barriers on their own carriers,” the firm said.

The removal of curbs would enable airlines to tap into sources of ancillary revenue such as extending zero-baggage fares — which would allow passengers with no baggage to benefit from lower fares, while those with baggage would pay an extra fee thus providing airlines a new source of income.

CAPA estimates that Indian carriers could generate $400 million more a year if they were able to offer zero baggage fares. Indian carriers have struggled to tap ancillary revenues because of curbs by the government, which is sensitive to any increase in fares. In 2015, DGCA allowed airlines to offer zero baggage fares but later rescinded the decision.

Airlines have over the years been able to unbundle many services and earn ancillary revenue, such as extra fee for seats with leg room and meals onboard.

CAPA also reiterated the need to mandate that airlines have a minimum cash reserve to be able to renew their operator’s permit.

“CAPA has repeatedly recommended this since 2010. Most airlines today are technically bankrupt and are starved of cash to be able to operate. This is what drives them to discount fares, locking them in a cycle of instability. Unfortunately, this is not recognised at a policy level,” the consultancy added.

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Printable version | Jul 16, 2020 9:48:15 AM | https://www.thehindu.com/business/Industry/govt-must-allow-airlines-commercial-freedom/article31948247.ece

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