Air­fares may go up to off­set ef­fect of can­cel­la­tion norms

Hindustan Times ST (Mumbai) - - HTINSIGHT - Gireesh Chan­dra Prasad

NEW DELHI: Air­lines are likely to in­crease fares across the board by a few hun­dred ru­pees per ticket to off­set a pos­si­ble rev­enue hit from re­fund­ing cus­tomers for can­celled tick­ets, as pro­posed by the gov­ern­ment in a draft new pas­sen­ger rights char­ter last month.

An ex­ec­u­tive with a pri­vate air­line said the pro­posal for full re­fund if a cus­tomer can­cels a ticket within 24 hours of book­ing will up­set the pric­ing strat­egy that en­ables the in­dus­try to pro­vide low air­fare.

If the pro­vi­sion is re­tained in the fi­nal ver­sion that is ex­pected to be im­ple­mented in a cou­ple of months, air­fare will have to be ad­justed to re­cover the rev­enue loss due to re­funds, said the ex­ec­u­tive, who spoke on the con­di­tion of anonymity.

The gov­ern­ment es­ti­mates that about 7% of all air tick­ets in In­dia are can­celled.

As­sum­ing that the can­celled seats are not filled at the time of jour­ney, air­lines de­cid­ing to re­cov­er­ing the loss from re­funds may lead to an in­crease in fare in the range of ₹200-400, a gov­ern­ment of­fi­cial said on con­di­tion of anonymity.

A 180-seat air­craft, which sells seats at about ₹5,000, may take a rev­enue hit of ₹63,000 per flight if 7% of the tick­ets are can­celled with full re­fund.

“This is not an is­sue of air­line fi­nances, but one of pub­lic pol­icy,” the gov­ern­ment of­fi­cial said. “Pas­sen­gers may need to can­cel tick­ets at times due to un­fore­seen cir­cum­stances. We have to de­cide whether a cus­tomer should solely bear the cost of can­celling her ticket or should it be borne equally by all pas­sen­gers as a mat­ter of pub­lic pol­icy.”

The gov­ern­ment is firm in its com­mit­ment to im­ple­ment what it called the 24-hour lock-in op­tion.

Cus­tomers nor­mally do not feel bad pay­ing a bit more for book­ing a ticket, but would feel the pinch when they lose all the money due to can­cel­la­tion, said the gov­ern­ment of­fi­cial.

“Pas­sen­ger al­lowed lock-in op­tion for 24 hours (af­ter book­ing ticket) in which the pas­sen­ger can can­cel or amend the ticket with­out any ad­di­tional charges,” said the draft char­ter, which was re­leased on 22 May.

An of­fi­cial with a sec­ond air­line, who did not want to be named, said the lock-in op­tion would un­fairly deny some cus­tomers the op­por­tu­nity to avail of seats at low rates as the air­fare would have gone up by the time they even­tu­ally can­cel the tick­ets.

Emails seek­ing com­ments from Jet Air­ways, Spicejet and in­dus­try body Fed­er­a­tion of In­dian Air­lines re­mained unan­swered at the time of go­ing to press.

Ex­perts said the air­line in­dus­try is al­ready find­ing it hard to cope with the in­crease in jet fuel prices, which is eat­ing into the com­pa­nies’ mar­gins.

“In­creased com­pe­ti­tion in the avi­a­tion mar­ket has made it dif­fi­cult for air­lines to pass on the in­creased fuel cost to pas­sen­gers and ab­sorb­ing it has now reached un­sus­tain­able lev­els,” said Kin­jal Shah, vice-pres­i­dent, cor­po­rate rat­ings, at rat­ing agency Icra.


A file photo of an air­port. The gov­ern­ment es­ti­mates that about 7% of all air tick­ets in In­dia are can­celled

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