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HindustanTimes Sun,20 Apr 2014

Flexi-pricing here: your air travel may now cost more

HT Correspondent, Hindustan Times  New Delhi, April 29, 2013
First Published: 23:38 IST(29/4/2013) | Last Updated: 02:34 IST(30/4/2013)

Picture it like a pizza. The basic version may be cheap but the toppings will cost more. Air travelers will now have to pay airlines for a host of services they use, with the government opening up new avenues for airlines to charge more.

The aviation ministry has decided to allow airlines to unbundle charges so that seat preference, meals, snacks, drinks (except drinking water), the use of lounges, check-in baggage and the carriage of sports equipment and musical instruments — everything may be priced separately.

The government hopes the decision will help bring down the base fare as airlines will now charge for all other services. So, a passenger with only a hand bag will have to pay less than someone who has check-in baggage.

While on the face of it base charges may fall, experts say the fine print could hurt passengers.

“The cost of flying would increase. The base fare would hardly come down and other than frequent flyers, who travel with a single hand bag, all others would have to pay for services they use,” said Rajji Rai, chairman of Swift Travel International Ltd.

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The aviation ministry’s decision comes in the wake of AirAsia India getting the nod from finances ministry to launch a local airline.

Revenues from ancillary services constitute a significant proportion of revenues for global low-cost carriers such as AirAsia.

India had in 2011 barred airlines from charging for services like preferential seating.

“I welcome this progressive step. This is a significant step in aligning India with global practices in the airline industry to offer certain optional services to the passenger on payment basis distinct from the tariff, taxes and surcharges that are  common to all the passengers,” said IndiGo president Aditya Ghosh.

The ministry’s decision is based on the recommendations of the Nathan Economic Consultants.  Allowing airline to unbundle services has become a necessary aspect of exercising more control over operational costs and running a successful airline, the consulting firm had said.

“Globally, scheduled airlines are permitted to unbundle services and levy a charge for each of the unbundled services. These are called “Unbundled Flight Products” or a la carte pricing,” the ministry said.

“The objective of the decision is to facilitate airlines to offer low base fare for price-sensitive travellers, while at the same time offer choice to service seekers at a price. This will allow the passengers to benefit from lower base fares and to customise the product to better suit their requirements and budget while allowing airlines to develop more sustainable operations in an environment of wafer thin margins,” it said.

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