The civil aviation ministry on Thursday has suspended a decision requiring airlines to offer passengers free selection for at least 60% of the seats on a flight. Mint examines whether this will help airlines offset rising aviation turbine fuel costs triggered by the war in Iran.
What did the 60% free-seat selection rule mandate?
Last month, the country’s aviation regulator asked airlines to offer 60% of the seats on every domestic flight to be selected free of charge, allowing passengers to choose them without paying an additional fee. It also mandated that all passengers booked on one PNR should be seated together.
The directive came amid concerns over steep seat-selection fees. The civil aviation ministry said on 18 March it asked the regulator to step in and ensure more equitable access for passengers.
Why has the Centre suspended the seat rule now?
The Centre said in a letter dated 2 April to the Directorate General of Civil Aviation, the sector regulator, that the directive would remain suspended until further orders, pending a review of the matter. Mint has reviewed a copy of the letter.
The move had triggered strong objections from the Federation of Indian Airlines and Akasa Air, which submitted representations highlighting the operational and commercial implications of the rule. They said such a mandate would disrupt existing fare structures under India’s deregulated aviation pricing regime. As per the Federation of Indian Airlines website, its members include IndiGo, Air India and SpiceJet.
How much revenue do airlines earn from seat selection?
According to industry estimates, airlines such as IndiGo earn 0.5%-1% of their revenue from seat-selection charges, though the exact contribution is not disclosed. While the average fee is about ₹300 per seat, only a small portion of passengers actually pay for selection, limiting the overall contribution. Other passengers opt for seats to be allocated to them for free.
Even with a small share in total revenue, seat selection remains a high-margin stream, making it disproportionately important for profitability.
Will the suspension help airlines to offset rising ATF costs?
On 1 April, state-run oil marketing companies increased jet fuel prices for the month. Jet fuel now costs ₹104,927 per kilolitre in New Delhi for domestic flights, about 8.5% higher than ₹96,638 in March. Less than 48 hours later, the airline seat-selection mandate was suspended.
While not directly linked, the move should offer some cushion against elevated aviation turbine fuel prices by protecting a portion of ancillary revenue that was previously at risk, according to Jainam Shah, an aviation analyst at Equirus Securities.
Will passengers face higher airfares due to this move?
Analysts expect airlines to increase airfares moderately due to rising fuel expenses, with a steeper rise for international routes.
However, the pricing strategy of airlines is unlikely to change materially as the earlier regime has been restored and no meaningful increase in seat-selection charges is expected, Shah said.