Airlines are slowly mastering the art of upselling and are ready to offer that extra to passengers who are willing to pay more for better comfort or flexibility during their trip.
Both IndiGo and Air India which fly 9 out of 10 domestic passengers are rolling out multiple types of fares, where they bundle tickets along with extras. While making it costlier for those booking a basic fare- ticket, to cancel or reschedule their flights, they are lowering these costs for the higher fare bracket topping it up with extras.
For instance, since the beginning of July, market leader IndiGo, has sharply increased its cancellation fees for the lowest fare bracket. Passengers booking a “saver fare” will now shell out Rs 3,999 for cancelling a ticket at the last moment against the previous price of Rs 3,500.
But those opting for a higher fare bracket, which the airline calls “Super 6E fare,” will pay Rs 999 for cancelling a ticket. They will get to book extra roomier XL seats for free and will also get an extra 5 kg luggage allowance over the standard 15 kg.
“IndiGo has revised its cancellation and change fee policy to provide even more choice and flexibility to customers during their flight booking process. These changes are designed to give customers added flexibility and control when booking or amending their flights,” an IndiGo spokesperson said.Tata group owned Air India which is trying to turn around its fortunes after losses of over Rs 50,000 crore under government ownership have also rolled out the practice of different fare families.The airline, before privatisation defied industry practice offering 25 kg of free luggage allowance and reduced it to the standard 15 kg for the lowest fare bracket. But, for “Flex’ which is its highest fare bracket it still allows 25 kg. Passengers buying that ticket can reschedule their flight free of cost while others have to pay a hefty fee of Rs 3,000.
An airline official said that the price difference between a normal and ‘Flex’ ticket would be around Rs 1000 on a Delhi-Mumbai flight, but provide value of nearly Rs 5000, like 10kg extra baggage, zero change or cancellation fees, and more choice of free seats.
Airlines, say the strategy is working as even economy flyers are willing to shell out for more extras and also want to avoid high cancellation or change fees as short trips become more impromptu.
“Since introducing a menu-based pricing model last year, a significant number of Air India guests have opted for higher fare families even as lower options were available. Fare families make sense for today’s travellers who have varied preferences and that they value having the choice of features and services at different price points,” an Air India spokesperson said.
Indian carriers have historically struggled to earn this extra popularly called ancillary revenue. According to an estimate by aviation consultancy firm CAPA, while traffic has grown at double digit percentage, growth of non-passenger revenue has been below 5%.
Executives say in a market where 80% seats are in no-frills cabin, this extra revenue is crucial for airlines.
“In a market where yields are razor thin and where airlines are not free to unbundle fares due to strict government regulations, the airlines are trying to promote personalised pricing. These extra revenue over base fare are a critical driver of financial robustness,” said an IndiGo official.
