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May 20, 2013, 11.33 PM IST | Source: CNBC-TV18

Ministry asks airlines to clarify unbundling of services

Unbundling of services by domestic airlines, which allows them to charge for services like preferential seats and airport lounges, has already raised queries from the ministry of civil aviation.

Its early days yet for unbundling of services by domestic airlines, which allows them to charge for services like preferential seats and airport lounges, but it holds the promise of lower fares for passengers in the future. However, two days after some airlines implemented unbundling measures, the ministry of civil aviation swung into action and asked airlines to bring clarity for consumers on services offered and charged for . CNBC-TV18’s Sunanda Jayaseelan reports.

It was low-cost carrier Indigo's move to charge for all seats that set alarm bells ringing in the civil aviation ministry. While a flier will not be charged extra for a seat if no seat selection is made, those who want to sit together will have to shell out Rs 100 extra even for a middle seat. And while the ministry has sought to rectify this anomaly, those are not the only charges passengers will have to pay extra under as a part of such unbundled services.

Indigo charges Rs 500 for seats with more leg room, Rs 200 for window/aisle seats, and Rs 100 for middle seats.

Further, the airline on its website, says it will charge an additional Rs 1500 for every unaccompanied minor, Rs 1000 per infant, Rs 250 for every kg of excess baggage, Rs 4000 for 10 kilogram (kg) of prepaid baggage which is a service airlines use to allow customers to pay in advance for excess bags and Rs 2000 for bulk baggage which can be purchased over and above the minimum allowed.

Indigo's peer Spicejet's combo package --- priority check in, complimentary meal, seat selection, early baggage delivery is Rs 500, while Go Air is yet to announce unbundled services with the airline offering a meal complimentary at the moment.

Jet Airways & AI have reduced luggage allowance to 15 kgs from the existing 20 kgs effective May 15 and May 13 respectively. As other airlines move to replicate their competitors, aviation regulator will have to stay alert every step of the way lest the passengers get taken for a ride for want of clarity.

Although the purpose of unbundling according to the civil aviation ministry was to bring down base fares, we are yet to see it happen, with both experts and airlines themselves saying that fares will come down in due course.
Aditya Ghosh, president, Indigo says, “ Ultimately fares will come down once we calculate revenue generation from unbundling services.”

 “While all eyes are on airfares, experts say that with such a pay-for model, airlines are likely to carry lesser baggage and meals meaning lesser fuel consumption by airlines, critical in an environment where they are hurting badly… however there could be some silver lining for passengers as well. ”
Experts give us to understand that low cost carriers, and not full service carriers, are the only ones which will truly offer and therefore charge for the whole range of unbundled services, which means that you may not have to pay for a preferential seating if you fly on AI or Jet.

While AI and Jet have announced reduced free baggage allowance, sources in the government tell us these airlines haven't approached the DGCA to charge for any other services.

 

Jet Airways stock price

On August 21, 2014, at 10:02 hrs Jet Airways was quoting at Rs 252.00, up Rs 3.30, or 1.33 percent. The 52-week high of the share was Rs 414.70 and the 52-week low was Rs 210.25.


The latest book value of the company is Rs -196.11 per share. At current value, the price-to-book value of the company was -1.28.

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