Unbundling of air fares – will it impact the way Indians travel?

Times are changing, so is air travel. The year 2013 has been an eventful one for the aviation sector.

First came the news of the entry of a new player in the domestic scene – Air Asia India. Then, the Jet-Etihad deal was finalised. Even as the industry and consumers were evaluating the likely impact of the changes in the sector, the unbundling of air fares came as another surprise for air travellers.

Introduced at a time when the summer travel season is at its peak, travellers have not got a respite from soaring air fares. Though low cost carriers in many countries charge for, among other things, checked-in baggage, meals and even a preferred seat, internationally air fares are significantly lower than in India.

The Directorate-General of Civil Aviation (DGCA) recently allowed airlines in India to start charging separately for services such as preferred seats, extra leg-room and meals, known as unbundling of fares.

Days after the additional charges were introduced, there have been no changes in the fare structure of domestic airlines. So, will it impact the way Indians travel by air? To some extent yes, say industry experts.

“While business travellers will not be impacted while charged for seats or lowering of check-in baggage limit, the price-conscious Indian families and to some extent the small and medium enterprises will be watchful about this,” said.

Manmeet Ahluwalia, Marketing Head, Expedia India, notes that business travellers will not face the heat of the changed fare structure, but families and leisure travellers will have to bear the brunt.

According to travel portals and aviation experts, fares are expected to see a 25 to 30 per cent drop in the next two to three months.

“It is going to be a very different regime from July onwards,” said Deep Kalra, Chief Executive, MakeMyTrip.

The entry of game-changing airlines like Air Asia, which is one of the most cost-efficient airlines in the world, is set to shake up the market here, Kalra added.

“This will make the entry level fares for a new traveller much lower. After the peak summer holiday season, fares will come down by July,” he said.

Though fares are likely to fall after July, till then travellers will feel the heat of unbundling of fares.

While leisure segment travellers make air travel bookings a month in advance on an average, industry experts maintain this behaviour is set to change.

“Now, many leisure travellers may start making their travel bookings four to six months in advance in order to get better deals,” Ahluwalia said.

However, travel industry players feel that the Government should have first intervened to bring down air fares and then introduced the unbundling of fares. With the leisure segment travellers accounting for 75 to 80 per cent of the air traffic, price-sensitivity is likely to be a cause for concern.

In India the concept of low-cost carrier has disappeared ever since Kingfisher Airlines pulled out of the sector. Additional charges introduced in the fare structure may affect the sector adversely, says an official of a leading travel agency.

Online travel portal Yatra.com expects a slight shift, with consumers preferring the train to air travel.

>nivedita.ganguly@thehindu.co.in

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