IndiGo introduces a Lite fare for cabin baggage only

IndiGo has introduced IndiGo Lite fare, a lower-priced fare for passengers travelling with cabin baggage only. It comes just two weeks after Air India introduced a Basic Fare without complimentary meals.

Aeraltus take: Airline's don't always have the ability to control costs. But they can control what they sell.

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Fuel prices rise, airport charges increase, leasing costs move with interest rates and dollar depreciation costs, and airlines have two options: raise fares for everyone or rethink what is included in the fare itself.

On margins 3-4%, there is no buffer to absorb cost increases without either raising the headline fare or reducing what it includes. Rather than selling one economy ticket with the same bundle of services, Indian airlines are beginning to separate the produce into smaller pieces. After Air India removed complimentary meals from their basic fare on domestic sectors, IndiGo has now created a fare for passengers travelling without unchecked baggage. Unbundling becomes one of the few ways to keep the advertised fare low without reducing revenue from passengers who still value those services.

Aeraltus previously analysed that airlines directly control only one layer of India's six layer airfare cost stack. This doesn't change that framework but reinforces it. When airlines cannot materially influence most of their costs, they increasingly compete by redesigning the product instead of simply changing the ticket price.

What to watch:

1. Whether Akasa Air, Air India Express and SpiceJet introduce similar baggage-only fares, making this the new baseline for India's aviation market

2. Whether the DGCA India permits further unbundling of services over time. If more elements of the journey can be priced separately, competition may increasingly shift from who offers the cheaper fare to who designs the most profitable fare structure