Airlines may have to charge for check-in bags, indicates Goyal
May, 28th 2008
Airlines looking at various options to boost revenue in face of mounting cost of fuel
Airline passengers may end up paying for check-in baggage if Indian carriers decide to follow in the footsteps of their international counterparts as they try to cope with high jet fuel costs, even though some fear that such a move could keep more passengers away.
All airlines, which want to stay in business, will have to take such decisions, Naresh Goyal, chairman of Jet Airways (India) Ltd, Indias largest private carrier by passengers, told PTI when asked if the airline planned to charge additional fees for check-in baggage and other services. Goyal was speaking with reporters after taking delivery of a brand new Airbus A330-200 at the Berlin Airshow, which started on Tuesday.
The airline industry is facing a severe financial crunch primarily due to the increase in fuel prices, which constitutes about 40% of total operating costs, Goyal said. Kingfisher Airlines Ltd. is also looking at options to increase additional revenue as high jet fuel costs eat into profits. We are evaluating the idea of charging for check-in baggage. For that matter, we are looking all options but nothing has been finalised, Kingfisher executive vice- president Hitesh Patel told Mint. However, some airline executives fear such moves will have an adverse affect.
We are already feeling the pinch of less passenger response because of higher fuel surcharge on tickets, said a senior executive with a private airline who didnt want to be identified. Passengers are paying Rs2,725 towards surcharge and tax. Low-fare carrier SpiceJet Ltd and full-service airline Paramount Airways are open to the idea, while InterGlobe Aviation Pvt. Ltd-run IndiGo said it hasnt yet contemplated such a move.
American Airlines Inc., the worlds largest, decided last week to charge $15 (Rs 643.5) for each bag checked in. Its rivals, including United Airlines, US?Airways, Northwest Airlines Corp. and Delta Air Lines Inc., are evaluating the idea. There are several steps that Indian carriers can take to offset soaring fuel prices, said Douglas McNeill, a transport analyst with UK-based institutional financing firm Blue Oar Securities Plc., in an email. First, they can introduce charges for parts of the service that used to be included in the ticket price: putting a bag in the hold, for example; second, they can add new services Ryanair, for instance, has recently made it possible for people to advertise their holiday homes on its website; third, they can ground aircraft on less profitable routes and at seasonally weak times of the year, he added.
However, McNeill said none of this would really help unless fuel prices decline substantially. Carriers that are poorly capitalized or marginally profitable will find it increasingly difficult to stay in business, he added. The US?market, on the other hand, is more mature and there is scope for such experiments. Passenger traffic in India has slowed down to 11.12% in the first three months of 2008, from a corresponding growth rate of 39% in 2007.