The airline body, Federation of Indian Airlines (FIA) has written to the government on behalf of all airlines to protest against this. However, they are strangely absent and silent when it comes to passenger complaints against airlines. There is no doubt that the FIA have some deep pain points against the government like rampant taxation, varying ATF, lease costs etc, and they need to resolve it with government. But to fleece passengers is not the way forward.
BLACK SWAN & PROFITS
“Why are you supporting this?” he asked me, and my mind rushed back to covid, Diwali 2024, the Russia-Ukraine war, 737 Max and P&W groundings, surge pricing, the AI-171 tragedy, the IndiGo crisis of 2025, the Iran war and other black swan events. Sadly, the airline industry, of which I am a part of, have fleeced passengers, with fares spiking up to 10x during crises. Adding to the strain, the DGCA lifted fare caps introduced during the IndiGo crisis. The irony is that it has been done during the global oil crisis, the likes of which we have never been seen since the 1970s rationing of oil. Some of you readers were not born then! The timing raises questions: was this appropriate, or could regulators have waited, especially while mandating 60 per cent free seat selection amid mounting airline pressures?
GLOBAL PRACTICES
In order to gauge global practices, we surveyed many world airlines – Full-Service Carriers (FSC) and Low-Cost Carriers (LCCs), and were surprised to find that many of them permitted free seat selection 24 hours prior. Even Southwest, the big daddy of global LCCs, did not charge for seat selection for 50 years until 2025 and was still hugely profitable. In 2025, they brought in paid seating, but still maintained 14 rows of seats as free seats.
A US Congressional committee probe (2024–25) into aviation junk fees found that the big five airlines earned USD 12.4 billion from seat fees between 2018 and 2023, despite offering free seat selection 24 hours prior. It concluded that ancillary pricing is often unrelated to service costs and increasingly driven by algorithms using customer data. The committee recommended stricter disclosure norms, granular fee reporting to the Department of Transportation, investigation into incentive-driven fee practices, penalties for unfair conduct and a treasury review to ensure compliance of ancillary charges with transportation tax regulations.
Airfare deregulation in India began in 1994, and since then, fares have steadily climbed, with every spike in oil and ATF prices setting new benchmarks. The real shift came around 2007 with the rise of low-cost carriers, as the DGCA allowed airlines to unbundle fares and monetise ancillary services. By 2011–12, preferred seat selection had become standard, and formal guidelines in 2015 ushered in the era of drip pricing where add-ons became core revenue drivers.
Circular No. 3/2015 introduced an opt-in framework with regulatory oversight but stopped short of capping seat selection charges. That omission lies at the heart of today’s friction. In several cases, passengers pay Rs 350 to Rs 2000 on a Rs 6000 ticket, nearly 20 per cent of the base fare for seat selection alone. The recent mandate requiring 60 per cent of seats to be free marks a partial rollback, driven by Supreme Court intervention.
Yet, Indian aviation has never been a pure free market. It operates as a hybrid system, blending market dynamics with state intervention. Schemes like UDAAN (Ude Desh ka Aam Nagrik) provide viability gap funding of up to Rs 2500 per hour to connect tier 2 and 3 cities, underscoring the government’s role in shaping the sector.
Now, the industry faces harsher reality. A cold dark summer looms, with reduced international travel, route cuts, rising fuel costs and potential layoffs. Air India is operating at just 30 per cent of its normal Middle East capacity. Growth could dip by 3–5 percentage points, while costs may rise 12–16 per cent. With consumer confidence shaken, recovery may not arrive until the festive season.
The path forward lies in balance. A pragmatic solution to the free seat debate could involve 50 per cent seats offered free, with the rest priced subject to open access 24 hours before departure. Crucially, seat charges must be capped at 10 per cent of the base fare. Airlines must tread carefully. The threat of fare hikes by the FIA will be counterproductive, since it could result in a three way face off with the government, judiciary and the regulator. The consumer is the goose that lays the golden eggs, and the airlines and government must realise it and handle them with care.
The author is CEO of Avialaz consultants and an aviation expert.