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In what comes as a fresh attempt after years by an Indian airline to unbundle the check-in baggage service for lower fare categories, Tata group’s budget airline Air India Express has launched cabin baggage-only fares. Zero baggage or no check-in baggage fares are a prevalent practice among low-cost carriers (LCCs) in various aviation markets including North America, Europe, and Southeast Asia, but it never really took off in India due to a combination of factors, which included regulatory constraints that blunted the competitive edge such fares could have had.
Even as the earlier regulatory limitation on unbundling of airfares, which had effectively capped the additional charge for check-in luggage at just Rs 200 for the standard 15-kg allowance, was done away with in 2021, Indian carriers adopted a wait-and-watch approach. According to industry insiders, while airlines have been closely looking at introducing no check-in baggage fares, they want to take it slow as the Indian consumer is habituated to the luggage allowance and a gradual change in habit is seen as a prerequisite before such fares become the norm and not the exception.
Nevertheless, introduction of this fare category by Air India Express could nudge other Indian airlines, particularly no-frills carriers like IndiGo, Akasa Air, and SpiceJet, to follow suit. This, industry sources say, could change airfare structures in India in a big way going forward.
Air India Express on Tuesday announced the launch of “Xpress Lite fares”, which are essentially zero check-in baggage fares that the airline says will be lower than the regular fares (which include a free check-in baggage allowance). For the time being, the airline is offering this fare category only on its own website and mobile application.
In order to attract flyers to this lower fare category, Air India has sweetened the deal by offering 3 kg of complimentary cabin baggage allowance in addition to the regulation 7 kg, taking the total cabin baggage allowance included in the fare to 10 kg. Flyers booking tickets at Xpress Lite fares will also have the option to separately pre-book check-in baggage allowance at “significantly discounted rates”. And of course, passengers can buy check-in baggage allowance even at the airport, although it might cost them more than pre-booking the allowance.
“The launch of Xpress Lite fares heralds what we hope will be a new way to fly in India, extending a proposition already popular amongst flyers across the world, including international airlines flying to and from India…Xpress Lite Fares across our domestic and international network have the potential to redefine convenience in air travel while delivering exceptional value,” said Ankur Garg, Chief Commercial Officer at Air India Express.
In theory, unbundling refers to dividing the product or service into different components and selling each at a different price. It is targetted at stratifying the market and appealing to price-sensitive consumers by offering more choices in terms of more combinations of individual offerings instead of a single, all-inclusive offering. In simple terms, it refers to selling the basic product and all its bells and whistles separately, allowing the buyer to choose only the add-ons that she needs, instead of forcing a uniform product that costs more.
Unbundling is an established strategy among airlines—primarily LCCs—globally and allows them to maximise profits by delinking services like baggage and in-flight food and beverage services from airfares. While on the one hand, such a pricing strategy allows carriers to rationalise costs and offer multiple fare offerings, on the other, it helps them offer lower fares to price-sensitive flyers willing to forego such services in favour of cheap airfares. Apart from price-sensitive travellers, such fares also suit corporate flyers taking short work trips. Lower luggage load also helps airlines save on fuel, and also allows them to use vacant space in the cargo hold to generate ancillary revenue by hauling goods.
Over the past few years, the success of LCCs globally has pushed a number of full-service carriers (FSCs) in other markets to go for the unbundling strategy. For FSCs, unbundling allows them to price basic airfares that may be competitive to what an LCC may be offering, thereby attracting the price-sensitive flyer who may otherwise not even consider the FSC. On the other hand, a number of overseas LCCs, which earlier offered only unbundled airfares, have started offering bundled fares with inclusions like check-in baggage allowance and meals, to attract flyers who may be less price-sensitive while looking for some extra comforts.
Unlike a number of other aviation markets where hand baggage-only airfares are the norm among the LCCs, the Indian aviation space had mostly been an outlier when it came to the country’s home-grown airlines. To be sure, a number of foreign carriers operating flights to and from India have been offering stripped-down airfares without any check-in allowance for years now.
That is not to say that Indian carriers did not try this model. They did, but could not make it commercially lucrative for themselves as well as flyers due to limits imposed on check-in baggage charges by the regulator Directorate General of Civil Aviation (DGCA).
In 2016, the regulator had allowed cabin bag-only fares, but effectively capped the additional charge for check-in luggage (up to 15 kg) at just Rs 200. The DGCA had said that airlines were allowed to charge only the “amount of incentive offered compared to lowest fare” to passengers who booked hand baggage-only fares but turned up at the airport with check-in baggage. As the maximum incentive for zero check-in baggage airfares was Rs 200, the maximum airlines could charge for check-in baggage for such fares was Rs 200 up to 15 kg.
According to industry insiders, the low cap did not allow airlines to commercially exploit the unbundling of check-in service, and though some did try it out, such fares never took off. Then in 2021, the DGCA finally allowed unbundling of services without a cap on charges for check-in luggage. However, no Indian carrier subsequently announced cabin bag-only fares, until now. It remains to be seen if other carriers will join Air India Express in launching zero check-in baggage fares and pushing this popular pricing strategy in the Indian domestic aviation market.
