The recent 'unbundling' of some services such as seat preferences or meals on board might be helping airlines to earn a lot of ancillary revenue, but the government is considering whether it could limit the number of 'preferred seats' on sale on each flight.
The government has been prompted to step in just days after it announced unbundling of these services following reports that some airlines were charging for a very large number of seats, with one of them even imposing fees for the 'congested' middle seat, official sources said.
They said the Civil Aviation Ministry was now looking at framing rules to cap the number of preferential seats the carriers can offer in a flight.
However, a decision would be taken only after the airlines revert to the Ministry with their proposals identifying such seats in about 10 days, they said.
In 2010-11, when some Indian carriers had started pre- booking seats, the Directorate General of Civil Aviation (DGCA) had stepped in and issued a directive asking them to withdraw the charges ranging from Rs 50 to 400.
DGCA had in July 2011 asked all airlines "to withdraw such charges with immediate effect under intimation to this office. ... Any mention about the same on the website may also be deleted on an immediate basis."
But the Ministry has now allowed the airlines to impose additional fees for these services, with official sources saying the fliers should have the choice to book preferential seats. But the middle seat in an aircraft cannot be termed a preferential one, they said.
They also favoured a cap on the number of preferential seats an airline can offer in a flight and said the aviation regulator could consider framing regulations on the matter in line with prevalent international norms.
Even when the DGCA directive was in place, no-frill carrier IndiGo was offering a package, IndiGo Plus, in which a passenger could block a seat and get meals on board by making extra payment while booking a ticket.
According to rough estimates, an airline selling about 25 preferred seats on a flight would be able to earn additional revenue to the tune of Rs 8-10 crore annually. This is notwithstanding their additional earnings from excess baggage, sale of meals, use of lounges and other services.
Industry estimates indicate that around ten per cent of seat capacity could be earmarked preferential and the window and aisle seats put up for pre-booking for a specified fee.
The government's decision on unbundling came about three weeks ago ahead of Air Asia India launching its operations. Its Malaysian parent company Air Asia is known to charge for seats, food, in-flight entertainment and also a convenience fee to subsidising cost of implementing and upgrading its online payment systems for more secure booking.
Such ancillary revenues have enabled airlines in the US to collect over $6billion last year from only baggage and reservation change fees -- the highest amount since the charges were introduced five years ago.
According to latest data issued by the US Bureau of Transportation Statistics, the share of ancillary revenue was 18-20 per cent of the total revenue for some American airlines, while for some others, it was a modest two-five per cent.
These extra charges have helped the US aviation industry to return to profitability. Some American carriers were also charging fees for the ability to skip long queues at the security-check gates.