Unbundling services: the route to profitability for airlines in India

Abstract

Purpose – This paper aims to explain how airlines in India and customers can both benefit by the unbundling of services. Design/methodology/approach – The paper explores how a recent regulatory change allowing unbundled services will affect the airline industry in India. Using illustrations, it highlights the benefits to the airlines and to the customers. It recommends the strategies that airlines can follow. Findings – Airlines in India can now offer unbundled services. However, regulatory authorities need to allow greater flexibility to airlines. Given more flexibility, airlines can design offerings that will improve their profitability while simultaneously benefiting customers. Practical implications – The government needs to go beyond the current regulatory changes. Providing increased flexibility will benefit both airlines and customers. Airlines would need to understand customers more intimately, experiment in the market, lobby for flexibility and develop strategic agility to benefit from the changed regulations on unbundled services. Social implications – It concedes that airlines can now design unbundled services such that only those customers who value a service get charged for the service. Those customers who do not need a service can get away by paying a lower fare. The government has taken the first steps in the right direction. Once it provides greater flexibility, the airlines in India can benefit significantly. Originality/value – The paper considers the unique context of the airline industry in India where recent regulatory changes are likely to make the industry more dynamic and improve profitability of airlines. It provides insights in to the challenges faced under the current system and recommends strategies for the government and companies to follow.