EFT Special: Where is Indian aviation industry headed?

By EFT Correspondent

Going by the developments in the Indian aviation sector last year, not many doubt that there is enormous scope for growth in India’s air traffic over the next few years. Especially with low fare carriers spreading their wings to encompass more destinations with greater frequency.

In one of the interviews conducted during EyeforTravel.com’s inaugural conference in New Delhi in October 2006, Raj Halve, chief commercial officer, GoAir felt that supply growth will create its own demand over the years and hence a healthy growth of traffic of over 25 percent per annum is expected over the years.

In order to gauge how the Indian aviation industry is expected to shape up in 2007, EyeforTravel.com’s Ritesh Gupta spoke with Halve. Excerpts:

What in your opinion would make the headlines in 2007 in the travel and tourism industry?

The key headlines in 2007 are going to be on dramatic increase in domestic Tourism and the “de-seasoning” of many destinations.

While international tourism, both in and out bound is growing rapidly, India is as a country going to be most impacted by domestic growth. Also, some years ago, many destinations were purely seasonal – Goa from December to March etc. With new segments entering the market, we are already seeing the flattening of these peaks to some extent and we believe this process will continue and gain further momentum.

Tourism was originally conceived as a foreign exchange earner to support balance of payments and to promote international understanding. Today, it is reckoned as a major instrument of socio-economic development.

For developing countries it offers a reliable route of a faster and less expensive way to create jobs and also to provide a means of advancement to deprived sections of society. Indian Tourism has a lot to sing about at the moment with the sector witnessing a boom with a 26 percent increase in revenues this year. The sector now accounts for 320 million domestic travellers and three million inbound travellers, mostly consisting of Non Resident Indians (NRIs) and People of Indian Origin (PIOs). This double digit growth expected in the travel and tourism industry will surely reflect on the Indian aviation Industry. As a result, airlines are planning a capacity expansion in the year ahead which is sure to be a headline grabber.

With budget carriers entering the aviation segment, not only has the aviation industry changed, but also the tourism and hospitality field. With low fares, airlines are attracting and increasing tourists from metro and non-metro cities and really driving the domestic tourism segment. Tourism is one of the key drivers of economic growth in our country. Regular as well as first time travellers are looking at budget travel without compromising on quality and service.

With Indian tourism attracting tourists from around the globe, the state tourism governments are also coming up with innovations like GoAir tie-up with Goa Tourism and Kerala Tourism Boards which makes up for interesting news. Another newsmaker will be the PATA Travel Mart to be held in India in 2008. And of course, travel distribution in India gaining new face with budget airlines acquiring majority in aviation travel segment will be the news of the year.

What are going to be the pressing issues that are looming in the year ahead?

The growth of the Indian aviation industry has truly been phenomenal over the past few years and we have seen the entry of many serious business players into the aviation business. While this is a godsend for the passenger, the low cost airlines have had to cut heavily on pricing to lure passengers from train.

Increasing fuel prices and back-end operations’ costs is taking its toll on many an operator. As reported recently, quite a few airlines have posted losses in the last quarter and will continue to do so unless they find a way of stemming the outflow and generating abundant revenue streams in addition to reducing operating costs abundantly.

Outsourcing is critical for low-cost airlines as is done by all airlines worldwide. The key areas where outsourcing must be allowed are MRO, security and ground handling. Just outsourcing these can reduce costs by 30-35 percent.

Lack of trained pilots and steady increase of the ATF prices since March 2006 is a major cause of concern. The Government must impose a flat VAT on ATF which will reduce the operational costs of airlines.   

Also, seeking immediate attention is the impending development of travel infrastructure which leads to congestion at the metro airports in India today, a problem so acute that most domestic operators are invariably waiting for a considerable period of time to either land or take-off thereby incurring significant losses.