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New offer from Air India Express on hand baggage-only fares

Context:

  • Recently Air India Express has launched ‘cabin baggage-only’ fares which is a fresh attempt after years by an Indian carrier to unbundle the check-in baggage service for lower fare categories.
  • ‘Zero baggage’ or ‘no check-in baggage’ fares are offered by several low-cost carriers in North America, Europe, and also Southeast Asia.
  • But these fares never took off in India due to a combination of factors which include regulatory constraints that would have blunted their competitive edge.
  • While a regulatory limitation that effectively capped the additional charge for check-in luggage at Rs 200 for the standard 15-kg allowance was removed in 2021, airlines chose to wait and watch the move.
  • Indian consumers were generally seen as habituated to the luggage allowance, and the carriers saw a gradual change of habit as a prerequisite for ‘no check-in baggage’ fares to become the norm.

How will Air India Express’s new fare category work?

  • Air India Express recently announced “Xpress Lite fares”, which are essentially ‘zero check-in baggage’ fares that the airline says will be lower than regular fares (which include a free check-in baggage allowance).
  • To make the deal more attractive Air India Express by offering 3 kg complimentary cabin baggage allowance in addition to the regulation 7 kg, taking the total allowance included in the fare to 10 kg.
  • Those who book tickets at Xpress Lite fares have the option of separately pre-booking check-in baggage allowance at significantly discounted prices.
  • Passengers can also buy check-in baggage allowance at the airport, but it might cost them more in money.
  • The Xpress Lite fare is currently available only on the airline’s website and mobile app for now.

How does the unbundling of fares benefit airlines?

  • In theory, unbundling refers to the process of dividing the product or service into multiple components, and selling each component at a different price.
  • The main idea behind this is to stratify the market and appeal 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 words unbundling is the selling of the basic product and all its bells and whistles separately, and allowing the buyer to choose only the add-ons that she needs, rather than forcing her to buy a uniform product that costs more.
  • By delinking services like baggage and in-flight food and beverage services from air fares, airlines can maximise profits while attracting passengers who are willing to forego such services in order to fly for somewhat cheaper prices.
  • Besides price-sensitive customers, such fares also suit corporate travellers who travel on short work trips.
  • Lower luggage loads also help the airlines to save on fuel costs.
  • They can, in addition, use the available space in the cargo to generate ancillary revenue by hauling goods.

The post New offer from Air India Express on hand baggage-only fares appeared first on Vajirao IAS.

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