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Is the low-cost airline you are flying really low-cost?

There is hardly a price difference between full-service carrier (FSC) and low cost carrier (LCC) if you opt for one or two services more

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When Delhi-based marketing head of a financial firm Priyadarsi Bal logged in to low-cost carrier (LCC) IndiGo's portal late last month for web-checking the next day's flight from Bhubaneshwar, he was asked to pay extra fees for selecting seats next to his family members.

Bal was to travel along with his wife and daughter, though on two different PNRs (passenger name records). Perplexed, Bal called up the customer care to be told that as per the revised policy all seats pre-allocated on web check-ins were charged. He was asked to check in directly at the airport if he did not want to pay extra.

On reaching the airport, Bal was informed that adjacent seats were not available, forcing him to request fellow passengers to exchange seats.

An infuriated Bal then shared his grievances on social media. His post went viral, attracting the attention of Ministry of Civil Aviation, which announced a probe. "We are reviewing these fees to see whether they fall within the unbundled pricing framework," the ministry said.

The unbundled pricing, as mandated by the ministry, provides the fliers with the option to pay for services they choose to avail. The airlines are allowed to charge separately for preferential seating, meal/snacks/drink (except water), using airline lounges, check-in baggage, sports and musical equipment, fee for special declaration of valuable baggage.

Indian carriers so far have been charging fees for web check-ins of seats that are located in the front or windows and aisle up to certain rows.

While the airlines later said the reservations were for certain seats, it prompted many to ask whether airlines in India are really low-cost?

A back-of-the-envelope calculation by online travel platform Ixigo on November 28 found the answer to be no. For example, a full service carrier (FSC) flying from Delhi to Mumbai on December 10, a flier will have to pay approximately Rs 7,133 for a flexi-fare option, which offers a complimentary hot meal, beverage, priority check-in and a baggage allowance of 20 kg. If you compare with an LCC, for the same route and day, a traveller will have to shell out Rs 6,596 for a basic saver fare with a baggage allowance of 15 kg. For meals and extra baggage allowance can add Rs 2,000-2,500 to the basic saver fare.

Aloke Bajpai, CEO and co-founder, ixigo, said, "Full-service carriers are experimenting with fares by offering flexible features at different price points to attract LCC customers."

With the entire sector in red, almost all the airlines in the country are looking to raise revenues from ancillary sources, which are currently less than 10% of their total revenues, as against much higher share of revenues (10-20%) in developed markets. However, these measures are not adequate to compensate the large hike in ATF prices and the rise in costs due to rupee depreciation, rating agency Icra said.

Do pure LCC exists in India?

According to analysts, true LCCs do not exist in India and the situation is likely to remain unchanged for several decades to come.

The reason is that LCCs are primarily required to fly between satellite (secondary) airports of the city and fly during the non-peak hours. However, both the conditions are not met in India as none of the cities have secondary airports. Further, all LCCs just like their FSC counterparts fly during the peak hours.

So adding the other external dynamics such as fuel, maintenance, handling charges, there is hardly any difference remains between LCCs and FSCs due to lack of a structural environment in India.

Mark D Martin, founder & CEO of Martin Consulting, a Dubai-based aviation consultant, said in India the LCC are nothing more than the airlines which provide fares on the preferences of the customers. So ultimately, it depends upon the customer to decide about his/her preferences and fly the airline accordingly. For example, the preference of someone travelling for a vacation will be different in comparison who is going for just a quick meeting and will fly back the same evening. "So a passenger can choose to have services as per her or his requirements and pay accordingly" said Martin, a former head of strategy at SpiceJet.

Are airlines using algorithms for splitting the families and seek additional charges for travelling on adjacent seats?

While Indian aviation fraternity and flier debate over the subject, a similar deliberation is also going around in the UK. The airlines in the UK have reportedly been called out for using algorithms that split up the families with the same surnames and seek additional charges for travelling in adjacent seats.

Distinction between LCCs and FSCs blurring

Interestingly, FSCs, which so far had all the charges covered in the fares, now seems to be imitating the LCCs. In the past few months Jet Airways and Vistara have introduced "flexi-fares" with passengers paying for services she/he wants. Analysts claim the tectonic shift in Indian aviation due to the pricing pressure may further blur the brand distinction between the LCCs and FSCs.

Aloke Bajpai, CEO & co-founder, ixigo said, "Full-service carriers are experimenting with airfares by offering flexible features at different price points to attract customers from LCCs."

However, Leslie Thng, CEO of Tata Sons-Singapore Airlines JV Vistara differs. In an earlier interaction with DNA Money in August, Leslie said, "On the contrary, our new pricing model, Vistara Freedom Fares, simplifies flying for travellers and can be a game-changer in the industry. It is a novel concept that the biggest and the best airlines all around the world have adopted in response to customer needs."

Fliers' mindset a 'problem', claim LCCs

The industry observers claim that Indian "culture" is one of the reasons why airlines are finding it difficult to charge for services like foreign LCCs. For example, in India it is universally believed that drinking water has to be offered to anyone for free, even to an enemy. If the airline start charging for water, it will be taken negatively by most of the Indian fliers, unlike in many foreign countries, where it is considered perfectly fine for to be charged for it. Further, there is a strong perception here that all the services have to come complimentary with the ticket.

Amid this, Martin has an advice for Directorate General of Civil Aviation. "Not to interfere and leave it to the market dynamics. If the airlines are trying to charge more, then they will suffer as market forces will come into play and the concerned airline will be left with no option but to take the corrective steps," he said.

ROLE REVERSAL

  • At times, a low-cost carrier could even get more expensive if you add all the service preferences which one would have got if flying in a full-service one
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