India's Aviation Market - Interview with Roshan Mendis, EVP / CCO of Sabre Travel Solutions

Dark/Light Mode (18/05/23)  The latest data from Sabre highlights India's incredibly strong growth potential with domestic travel already above 100% of pre-pandemic levels and international catching up rapidly.

With a population of more than 1.4 billion, India recently surpassed China as the world’s most populated country, and has been predicted to overtake Germany to become the world’s third biggest travel and tourism country.

With major aviation developments in the country announced recently, Sabre has sifted through data to examine the potential of India’s travel growth, and what we may see in the coming years.

Key findings include:

- Significant investments in the tourism industry are expected to increase, and support, airline capacity requirements for domestic and international travel.

- As of March 2023, bookings are back to 100% of pre-pandemic levels for domestic trips and are at nearly 100% of pre-pandemic levels for international trips, with domestic travel increasing in popularity and domestic capacity having already exceeded pre-pandemic levels.

- Indian carriers are expected to play a significant role in international travel.

- Passenger numbers are increasing despite significantly higher international fares.

- The growing middle-class segment in India, expected to double from one in three to two in three Indians by 2047, has been forecast to travel more as travel becomes more affordable.

Significant Investments

Major confirmed plane orders by Air India, Akasa Air and IndiGo, with more expected, will result in close to 1,200 more aircraft for Indian carriers over the coming years.

The Union Budget of India 2023, presented in February this year, also announced a series of developments to support potential tourism industry growth.

Top three international routes with fare increases in India seeing an increase in passengers

A $12 billion investment was announced for aviation infrastructure upgrades to support capacity increments, with aims to increase the number of airports in India from 148 to 220 by 2025, alongside more aviation schools to prepare for increased demand for pilots.

India is also refurbishing and developing nearly 100 airports, under the “Revival of Unserved and Under-served Airports” programme, aimed at making air travel more affordable and accessible, while further supporting an increase in capacity, especially for domestic travel.

As of March 2023, bookings are back to 100% of pre-pandemic levels for domestic trips and are at nearly 100% of pre-pandemic levels for international trips, with domestic capacity having already exceeded pre-pandemic levels

Sabre’s booking data shows that in January 2023, there were 11 million domestic trips, versus 11.2 million in January 2019, showing a travel recovery of 98.8%.

In February, domestic travel measured at 99.3% and eventually exceeded pre-pandemic levels in March at 107.4%.

In fact, domestic capacity has already exceeded 2019 levels since the beginning of this year, signifying that there is potential for domestic travel to grow significantly.

The strong growth for domestic travel and domestic capacity can be attributed to more Indians having turned towards domestic travel during the pandemic when they couldn’t travel further afield, as well as ongoing improvements in connectivity due to government investments.

In addition, India has seen a rise in low-cost carriers (LCCs) recently, with such carriers recording growth in domestic travel.

Domestic capacity for LCCs has been recorded at more than 110% of 2019 levels in the first 3 months of 2023. In Q1 2019, there were 23.2 million travellers flying on LCCs for domestic routes. The number increased to 26.5 million within the same period in 2023, an increase of 14%.

For international travel, there were 5.7 million trips in January 2023, versus 6 million in January 2019, showing a recovery rate of 95%. The recovery rate increased to 97.5% in February 2023, and is now at 99.5% in March 2023. Capacity for international trips has also been planned to exceed 100% of 2019 levels by Q2.

Increase in Indian airlines serving international routes between 2019 and 2023

Indian Carriers and International Travel

While domestic routes are predominantly served by Indian low-cost carriers (LCCs), Indian carriers now serve 42.7% of all international routes - an increase from 36% pre-pandemic.

Indian carriers could further grow on international routes, given a recent request by the aviation minister for domestic carriers (historically Indian) to fly more long-haul routes. It was also reported that India will not be increasing air traffic quotas for carriers from Gulf states, in line with this push for Indian carriers to fly long-haul routes.

International Air Fares

Travel has resumed at an incredible pace even though average international fares are 41.3% more expensive as of February 2023 when compared to pre-pandemic prices. Domestic fares have also increased, with fares at 24.5% more than pre-pandemic prices as of February 2023.

Some in the industry say this exemplifies the “revenge travel” phenomenon resulting from the long lockdowns, plus the fact that capacity could not catch up with the pent-up demand.

As more Indian carriers add domestic and international capacities, alongside aviation infrastructure upgrades, it is expected that travel will become more accessible and affordable for India’s rapidly growing middle-class population, encouraging them to travel.

A pan-India survey reported that currently, one in three Indians is considered middle-class and the number is expected to increase to two in three by 2047.

In that event, the sheer population size of India means that middle-class in India would be expected to almost double from nearly 500 million people to 900 million by 2047, almost 3 times the population of the U.S.A. where the middle-class makes up only 50%, around 180 million. In China, 163 million are regarded as middle-class, 13.7% of the population.

India's Aviation Market - Exclusive 4K Video Interview with Roshan Mendis, EVP and CCO of Sabre Travel Solutions

To learn more about India's aviation market and what the recent deal Sabre signed with Air India means to the company, Steven Howard of TravelNewsAsia.com visited Sabre's office in Richmond, England to speak with Roshan Mendis, Executive Vice President and Chief Commercial Officer at Sabre Travel Solutions.

In this exclusive interview, filmed on 17 May 2023, we discuss the aviation industry's development in India, how an airline decides which routes to launch when it makes such massive aircraft orders, where India is in terms of the use and development of NDC as a retail tool, the state of travel agencies in the country, how Sabre is using AI to enhance its solutions, and whether enough is being done to ensure that there are sufficient qualified personnel to power the aviation sector's very ambitious growth targets.

We also talk about the Air India deal, which products the airline will be using, what percentage of Sabre's business comes from India and how Roshan foresees that growing, whether the company has any plans to expand further in the country, and why there has been such a rapid recovery in air travel despite the high air fares. All that and much, much more in the exclusive video and podcast interview below.

PODCAST

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