29 November 2016 14:54:57 IST

A management and technology professional with 17 years of experience at Big-4 business consulting firms, and seven years of experience in high-technology manufacturing, Rajkamal Rao is a results-driven strategy expert. A US citizen with OCI (Overseas Citizen of India) privileges that allow him to live and work in India, he divides his time between the two countries. Rao heads Rao Advisors, a firm that counsels students aspiring to study in the United States on ways to maximise their return on investment. He lives with his wife and son in Texas. Rao has been a columnist for from the year the website was launched, in 2015, and writes regularly for BusinessLine as well. Twitter: @rajkamalrao

When all airlines behave like no-frills carriers

Ryanair become infamous for stripping everything away from the price of an airline ticket with the goal of offering the lowest prices anywhere (Image: Reuters)

Despite lower fuel costs, why are airlines miserly with their services?

Several good things are happening to the world’s airlines. The price of oil has dropped by over 60 per cent since its peak just a few years ago. As fuel costs are the second biggest operating expense for airlines, their income sheets are looking a lot healthier.

There is also the cost of hedging against fuel price increases. Unlike in previous boom and bust cycles, oil prices have stayed low and steady and are expected to be so for the next few years. So airlines have cleverly stayed away from buying fuel options which lock in the price of fuel in the future. A prominent line item on the income sheet of a major airline — hedging — has now gone to zero, saving the airlines millions of dollars.

Then, there are the fuel savings brought about by newer planes, such as the Boeing 787 and the new Airbus 320-Neo. These remarkably fuel-efficient planes lower the cost per flown mile by up to 15 per cent.

So, why are airlines so miserly with their service?


A relative recently flew IndiGo Airlines from Bengaluru to Bhubaneshwar. A mid-week, mid-afternoon flight was pricey at ₹5,300 one way, although the tickets were booked three weeks in advance. But for the entire duration of the flight, she was not served any snack, not even a small bag of peanuts, a standard item on even the stingiest of carriers. Everything that was served had to be bought in flight, although IndiGo says that it offers discounts if you buy in advance — say, while booking the ticket.

In comparison, most long-distance bus companies offer you free bottled water. On Shatabdi trains between Chennai and Bengaluru, the ticket price includes a nominal food surcharge of ₹80 but you are served a decent breakfast and hot coffee or tea twice during the five-hour trip. Why can’t airlines do this?

The truth is that airlines were, indeed, doing this for decades. Flying was largely limited to the elite, and in-flight service was often how one airline used to differentiate itself from the other, even in economy class. A piping hot breakfast was quickly served, even on short, 70-minute flights such as those from Bengaluru to Mumbai, with attendants working extra hard to clear the dishes in time before the final approach. High fuel prices or high labour costs did not factor into the decision-making when it came to offering service. If you flew, you were taken care of.


When fuel prices skyrocketed in the early 2000’s, some airline entrepreneurs saw a new business opportunity. They argued that travellers may be willing to forego a meal on the plane in return for a discount on the ticketed fare. Or travellers who may not want to carry checked bags may welcome an additional discount instead, and an entirely new sub-industry within the airline sector was born; it was called the no-frills airline.

Ryanair was the most extreme example of this phenomenon. An Irish low-cost airline headquartered in Dublin, the company become infamous for stripping everything away from the price of an airline ticket with the goal of offering the lowest prices anywhere.

A first-time traveller on Ryanair would be shocked at how Scroogy the experience could be. You book your tickets online but you pay a 2 per cent credit card fee. You have to print your boarding passes at home on your own printer using your own paper and ink. You pay extra for checked bags and you can only check in your bags online. (If you don’t, you pay a convenience fee for each task at the airport — printing your boarding pass and checking your bags). You are assigned seating by the airline — choosing your favourite aisle or window seat costs extra. If you want an exit row seat, that costs even more. If you want to pre-board, you pay a different fee. If you show up at the ticket desk less than 40 minutes before the flight departs, you pay a whopping €100 fee.

Once on board the flight, you will be shocked to see the most cramped seating arrangement on a plane ever. Most seats do not recline and many have no seat-back pockets. And once the flight reaches cruising altitude, do not expect anything from the airline — no water, no peanuts, nothing.

Is this flying?

Before you dismiss the airline as an also-ran carrier which will fail because of its own weight, it may surprise you that in 2013, Ryanair was both the largest European airline in terms of scheduled passengers carried and the busiest international airline. The company operates over 350 Boeing 737-800 aircraft, which is more than the combined fleet of all the Indian carriers. So presumably, the airline’s miserliness is ok for a lot of people.

Until you look at the complaints, of course.

No-frills airlines routinely draw the most passenger complaints, period. In the US, Spirit airlines — a Ryanair cousin in no-frills — is so reviled that most passengers never return to it after their first experience. Flights are habitually late and travellers are just glad when their planes land. The Economist wrote that Ryanair's “cavalier treatment of passengers” had given Ryanair “a deserved reputation for nastiness” and that the airline “has become a byword for appalling customer service ... and jeering rudeness towards anyone or anything that gets in its way.”

Today, all American carriers, British Airways and Air France allow only one checked bag for free — of a maximum weight of 50 lbs — for flights from the US to India. Just 10 years ago, when fuel prices were more than double what they are today, they would allow two checked bags for free, each up to 70 lbs. What happened?

In one word: greed.

The New York Times reported in 2015 that “a recent analysis of 63 airlines found that airlines earned $38.1 billion in ancillary revenue, or revenue from non-ticket sources, last year.” Airlines are making record profits for two reasons — fuel prices are low and fee revenue is booming.

The next time you go to the airport, you can bet on three things: you will be milked for fees and your overall travelling experience will likely be unpleasant. But you will arrive in one piece, because airline safety has tremendously improved.