The Indian aviation regulator’s decision to allow airlines to unbundle services could prove to be a windfall for carriers in the form of a potential ten-fold increase in their revenue from ancillary services.
At present, ancillary revenue or revenue from non-ticket sources (without cargo, excess baggage and cancellation charges) is less than 1% percent of the total revenue of Indian carriers at Rs 350-400 crore.
Centre for Asia Pacific Aviation (CAPA) Outlook 2014 estimates the airline ancillary market opportunity to be closer to $400 million (Rs 2,400 crore) (excluding cargo/ cancellation charges) in the next 3-4 years. “This is subject to execution of a structured ancillary business model,” said Kapil Kaul, South Asia CEO of CAPA.
With cargo, excess baggage and cancellation charges, ancillary revenue is about 7% of the total revenue at about Rs 4,000 crore.
HT was the first to report about the DGCA removing the 25% cap on seats that airlines can sell through pre-booking, which will further boost their ancillary revenue.
“There is a huge untapped market for ancillary revenue for Indian carriers. These include advertisements on boarding cards, baggage tags, on ground and on-board branding,” said aviation expert Subhash Goyal.
“Zero baggage allowance, if executed, could be a game changer as far as driving ancillary revenues,” said Kaul. AirAsia India had decided not to allow free check-in baggage when it launched operations, but DGCA forced the airline to allow 15-kg free check-in baggage per passenger.