The Big Change: Unbundling on Domestic Flights
The most significant shift for most travellers within India is the introduction of a new 'Basic' fare category on select domestic routes. This is what the industry calls 'unbundling'. In simple terms, Air India is stripping out certain services from the ticket
price to offer a lower starting fare. Under this new pilot program, the Basic fare still includes a 15 kg checked baggage allowance and a 7 kg cabin bag. The main difference is that a complimentary meal is no longer included. If you get hungry, you’ll have to purchase a meal separately up to 24 hours before your flight. This move is currently being tested on shorter flights, such as those between Delhi and Chandigarh.
The Benefit: Lower Fares and More Choice
The primary benefit of this new structure is a lower entry-level ticket price, potentially making fares cheaper by ₹500-₹600 on some routes. Air India says this is a pro-consumer move designed for price-conscious travellers who prefer not to pay for services they don't use. If you're on a short one-hour flight, you might not want a full meal anyway, so why pay for it? This approach gives passengers more flexibility and control over their spending. It also allows the traditionally full-service Air India to compete more directly with low-cost carriers like IndiGo, which has already responded with its own 'Lite' fare. This creates more competition on price, which can be a win for consumers looking for the cheapest possible option to get from A to B.
The Risk: Hidden Costs and Brand Dilution
The downside of unbundling is that the headline fare is no longer an all-inclusive price. While the ticket might look cheaper initially, the total cost could end up being higher if you decide to add a meal later. For families or travellers accustomed to the full-service experience, this change requires more attention during booking to avoid surprises. There's also a risk for the airline itself. For years, Air India has been positioned as a premium, full-service carrier. Introducing no-frills fares could dilute that brand image, making it harder to justify premium prices in the long run. Experts caution that anchoring customers on lower prices can make them less willing to pay for a full-service experience in the future.
Good News for International Flyers
While domestic fares are being unbundled, Air India is offering a straightforward discount on certain international routes. Effective from the beginning of July, the airline has cut the fuel surcharge on its long-haul flights to Europe, North America, and Australia. This decision was driven by a recent drop in global aviation fuel prices. For flights to Europe, the surcharge has been reduced by $80 to $125 per passenger. For travel to North America and Australia, the surcharge has also been cut by $80, down to $200. This move makes Air India the first Indian carrier to pass these savings on to passengers, making these international journeys slightly more affordable.
The Strategy: Competing and Increasing Revenue
These two pricing changes reflect a dual strategy driven by financial realities. The Tata Group-owned airline has been navigating significant financial losses. The move to unbundle domestic fares is a clear attempt to compete with budget airlines on price and to grow ancillary revenue—money earned from non-ticket sources like food and baggage fees. Globally, ancillary services are a huge revenue stream for airlines, and Air India is looking to increase its share, with ancillary revenue already having grown 2.6 times between FY24 and FY26. Meanwhile, cutting the international fuel surcharge is a classic full-service carrier move: passing on operational cost savings to customers on premium routes to remain competitive.
