Airlines in India plan to increase their ancillary, or non-ticket revenue, as they continue to lose money due to high fuel costs and the sale of tickets below cost.
While Air India hopes to maximise its revenue from advertisements on boarding passes, along with that from excess luggage, low-cost carrier, GoAir, plans to sell holiday packages and is exploring tie-ups with car rental companies.
According to a survey by technology solution provider Amadeus, airlines the world over earned $32.5 billion from ancillary revenue so far this year, a rise of 43.8 per cent compared to last year. A few low-cost airlines, including Ryan Air, Air Asia and Easyjet, earn nearly 20 per cent of their revenues from ancillary sales, while the global average for low-cost carriers is 6.5 per cent. US airlines contributed 38 per cent of the ancillary revenue, the report said. For US carriers, the sale of frequent flier miles, baggage fees, commissions, on-board sales, hotel bookings and priority check-in and seating, were the main contributors to revenue.
In India, however, the contribution of ancillary revenue is marginal. Aviation analysts estimate Indian airlines earn about three-five per cent of their revenue from ancillary components. Cargo contributes an additional 10 per cent to their revenues.
"We are looking at opportunities to increase ancillary revenue,'' said GoAir chief executive, Girorgio De Roni. The carrier is evaluating plans to tie up with car rental companies. It is also considering ways to increase revenue from on-board merchandise sale and travel insurance, and exploring advertisement opportunities on food trays and overhead luggage bins inside aircraft. Other carriers, including Jet Airways and Kingfisher, also sell holiday packages and co-branded credit cards.
"Our priority is to deliver good service to customers, both on the ground, as well as in the air, and give them the best value for money,' De Roni said, adding the contribution of ancillary revenue to GoAir’s overall revenue was "marginal". He, however, refused share the details.
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"Airlines need to focus on other aspects of revenue such as cargo, excess baggage and holidays,'' said Kapil Kaul of the Centre for Asia Pacific Aviation. “India is a price-sensitive market, and domestic airlines have been selling below cost. Though this has led to volume growth, airlines are facing the brunt of selling tickets below costs,” he added.
Unlike their counterparts in the West, airlines in India allow free baggage allowance and for long, have refrained from introducing the charge, owing to the fear of losing passengers. “The ancillary revenue concept is still not well developed in India,'' said an equity analyst.
The Director General of Civil Aviation (DGCA), too, has clamped down on airlines that charge passengers for preferential seating and bottled water. The move has not gone down well with airlines, with some saying it was a global practice to charge passengers for seats of their choice and food & drinks. “It is irrational,'' said a senior airline executive. “Hotels can charge for bottled water. Why then, should airlines be banned from doing so,'' he asked.