6 Feb, 2006
Indian Tourism Surge Hits Speedbreakers
MUMBAI: India’s fast-tracked travel & tourism industry is beginning to face major hurdles, speed-bumps and growing pains, which do not augur well for the future.
Speakers at a major travel show here last week noted that while the economic benefits of liberalisation, privatisation and deregulation are seeing inbound, outbound and domestic tourism grow to record highs, the infrastructure is inadequate to handle this pace of growth, and regulatory mechanisms do not exist to handle the looming airline bankruptcies and extend consumer protection laws to protect passengers.
Moreover, India’s lively democracy and stifling bureaucracy are ensuring that anyone with a vested interest is always there to throw another spanner in the works.
Speaking at Travelworld India, a trade show organised by the Indian Express group of publications, Ashwini Kakkar, president of the Travel Agents Association of India, said that inbound arrivals have crossed five million, outbound departures are expected to top seven million this year and domestic travellers are estimated at 400 million.
He said Indian Railways carries more people in one day than all the domestic airlines put together in a year.
India, which 10 years ago had only two airlines, now has eight and is looking at 20 by the 2010. However, a shakeout has begun with last year’s takeover of Air Sahara by Jet Airways, giving Jet access to many of its domestic routes as well as aircraft and international rights.
Poor infrastructure also means serious air-traffic congestion at the main airports. While low-cost airlines squeeze airports and administrative costs, air traffic control and runway restrictions mean that their aircraft go into hours of holding patterns every day, wasting millions of litres of high-cost fuel.
A irport workers protesting the privatisation plans of Delhi and Mumbai airports staged their first strike last week, thanks to which the chief minister of Jharkand state who was to inaugurate the TravelWorld show got hit by a flight cancellation. The federal aviation minister also cancelled his appearance after one of the losing bidders of the privatisation process decided to take the government to court.
Sudhir Kumar, a former director of the Airports Authority of India, said that privatisation should take place on “technical and commercial grounds” and not political basis. He called for the technocrats to be given more freedom to make decisions and for airport operations to be unshackled form the plethora of supervising agencies.
“We have more people to scrutinise the decisions than implement them,” he complained.
He said the entire privatisation deal had been explained to the unions, who had been assured that their jobs would be protected; the AAI had agreed to hire any retrenched workers with the only caveat that they may have to be transferred to another city.
“Their livelihood was not in question,” he said. “I don’t know what the ‘hungama’ (Hindi colloquial parlance for uproar) is all about.”
The increased airline competition has led to fare-wars with prices dropping to levels that are considered economically unsustainable. Air India’s chairman and managing director V Thulasidas said the airlines are now operating at dangerously thin margins.
He also warned about the negative impact of the pressure for open skies “which are demanded mainly by mega-carriers from countries with large markets or large carriers from airlines with small markets” both of whom want more access to India.
An open sky between the US and India now exists for cargo and, he says, to some extent, India is beginning to feel the pressure of large US airlines deploying huge capacity, driving down prices, driving away competition and “after the competition dies down, they are free to choose the level of competition they want.”
Former TAAI President Balbir Mayal says that all airlines, domestic and international, will just get involved in a cannibalistic fight for market share.
“The airlines claim that there is enough market is for everyone. I don’t accept that. The market is not going to grow at the same level as the new airlines are coming. (Airlines) first have to see how much the business is growing every year and then decide how much share they can get.”
Travel agents are wondering about their own survival, knowing that as fares and commissions head south, many hundreds of them will die, just as they did in the US.
Another travel agent, Mr C.V.Prasad asked whether the new Indian low-cost airlines were being fair to the customer in terms of their no-show and refund rules, and cancellation charges, implying that the customer would find out the hard way that the rules were stacked against them.
Ajay Prakash, MD of Nomad Travel, warned that what is applicable in the US cannot necessarily be transplanted into India. In the US, a woman can wear a bikini made out of the US flag but an Indian woman who tried the same with the Indian flag was being threatened by her neighbours with police action, he said.
Meanwhile, the Indian Railways is striking back with deals to protect its own market. The Indian tourism minister changed yet again last month after less than two years in office the boom in business travel is seeing hotel rates in major cities like New Delhi hitting US$ 250 a night, and climbing.
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