Zero baggage fares can generate additional $400 million for airlines : CAPA India

Giving airline management the freedom to take commercial decisions like offering zero baggage fares could generate an incremental $400 million revenue for Indian carriers, aviation consultancy firm CAPA India said in an advisory.

New Delhi: Giving liberty to the airlines to take commercial decisions like offering zero baggage fares could generate an incremental $400 million per annum in revenues for Indian carriers, aviation consultancy firm CAPA India said in an advisory on Monday.

"Airways in India are primarily targeted on the ticket value and neglect ancillaries. This is the end serves to drive down yields as passengers are typically extra delicate to the bottom fair than to two subsequent at the add-ons. Ancillaries generate as much as $50 billion of income for international careers and have confirmed to be key to profitability for people who have a transparent understanding of their potential," said CAPA India in a report.

Ancillary revenue is revenue derived from goods or services other than an airline's primary product offering like the seat selection, the extra bags, the extra legroom, etc.

"CAPA India estimates that Indian Carriers might generate and incremental $400 million every year in the event that they have been capable of supply zero baggage fares. This may also end in passengers with no baggage accessing decrease costs," added the aviation consultancy firm.

"Most Airlines today are technically bankrupt and are starved of cash to be able to operate. This is what drives them to discount fares, locking them in a cycle of instability. Unfortunately, this is not recognised at a policy level," CAPA India said in its advisory.

According to International Air Transport Association (IATA), Airlines will globally lose over $84 billion, the biggest in aviation history, during the financial year 2020 due to the Covid-19 pandemic and a muted travel appetite, while losses next year are seen at $16 billion.

"The Ministry of Civil Aviation should consider giving incumbent airlines 12-24 months to comply with this requirement, with the 1.5 months cash threshold to be met within 12 months. This will be a critical policy decision," the CAPA India advisory added.

Notably, after the lockdown, domestic flights in India started operating in a calibrated manner from May 25 and airfares were capped for three months till August 24.