No cheap air fares! Here's how your flight ticket prices may see an increase

The new Civil Aviation policy announced on Wednesday might help customers fly for cheap. However, latest norms by Directorate General of Civil Aviation (DGCA) might just put more pressure on airlines to increase airfares. 

DGCA norms are likely to have a direct impact on ancillary revenues of airlines. In order to make up for the lost revenues, airlines may increase ticket prices, experts believe. 

Airlines draw 10-15% of their topline from ancillary revenues such as cancellation and excess baggage which are major contributors, according to a JM Financial report. DGCA norms, once implemented, will have a negative impact the earnings of airlines and may actually lead to airlines increasing fares to make up for the loss of ancillary revenues.

The overall negative impact is however difficult to quantify as airlines do not share a break up of ancillary revenues, said the report.

The talk of capping air fares too does not come as positive for the aviation sector as it will end up putting more pressure on these airlines.

The norms on cancellations, refunds and excess baggage to be implemented are:

1. Ticket cancellation amount cannot exceed basic fare.

2. All taxes levies to be refunded in case of no show and cancellation.

3. If flight is cancelled within 24 hours of departure, compensation to be one way fare plus fuel charges or Rs10,000 whichever is less.

4. If the replacement flight is within 24 hours, the airline will have to pay 200% of base fare or Rs10,000 whichever is less. If it is beyond 24 hours, the compensation will be 400% of the base fare or Rs20,000 whichever is less.

5. Flyers will not have to pay more than Rs 100 per kg for first 5 kgs of excess baggage.

6. If an airline overbooks a flight it will have to arrange an alternate flight within an hour or pay compensation.

7. Refund to be applicable on all fares including promotional and special fares.