Liberal policies spell win-win game for both fliers and airlines

The decision of the ministry of civil aviation to allow airlines to unbundle services and charge passengers separately for check-in baggage, sports and musical instruments as part of baggage, choice of seating, snacks and meals, use of airline lounges and the like is a positive step. This move, which is in line with global practice, will not only allow wider choice to fliers, it will also allow airlines to work out new revenue streams and pare losses even while keeping ticket prices low for those who opt for basic services. This will hopefully end the slump in air traffic in recent months and maybe even reverse the trend.

The impact of these changes in airline regulations can be substantial as it follows other far reaching policy measures, like the bilateral agreement signed for boosting air traffic on the Gulf route. The Jet-Etihad deal, which is leveraged to take full advantage of the potential, may now encourage more international airlines to take a larger stake in the Indian civil aviation pie. Other similar bilateral tie-ups with countries in the Far East will add to the competition. The new budget airline venture between AirAsia, Tata Sons and Telestra TradePlace is a good beginning in this direction.

But a full turnaround can happen only if other basic problems such as high fuel taxes and high infrastructure costs are addressed. Categorising aviation fuel as a declared good can dramatically push down tax rates. A buoyant economy boosted by a dynamic aviation sector will fetch more revenues than taxes on aviation fuel. Rising air traffic will in turn ensure more efficient use of airports and bring down infrastructure costs. It will be a win-win game for both fliers and airlines.