The 2018 CAPA India Aviation Summit is wrapping up in Mumbai today, after three days of thought provoking discussions, bringing together all of the key stakeholders in the industry. CAPA’s platinum partner Skyscanner was on hand and have delivered an important glimpse into the India market. To access the report, visit Skyscanner’s case study: India on the rise: Growth ahead for one of the world’s leading aviation markets.
Key thoughts from Skyscanner
By all measures, the India travel market has experienced extraordinary levels of growth. Our exclusive Travel Insight data shows that from January 2015 to the end of 2017, there was a 97% increase in domestic trips per month on average, with international trips showing an increase of 72% for the same period. Similarly, flight searches in India have been up over 90%, with exits closely following that trend with a 70% growth rate.
Multiple forecasts suggest that this growth will continue for the years to come. According to BCG’s 2017 report, its total travel market value is set to grow at between 11 and 11.5% to $48bn by 2020. Similarly, Skift revealed that the number of tourists visiting India is set to double from 9.5 million in the next 10 years, with the luxury sector due to expand particularly quickly to reach $100bn in 2025 from its $7bn value in 2017.
The growth of the middle class: India is a heavily populated country, and Forbes forecasts that it will overtake China as the world’s most populated country in the next five years. However, travel has not been accessible to a large proportion of the population historically due to the low per capita income – which currently sits at USD1,700 according to Morgan Stanley’s 2017 report, and ranks well below that of other emerging markets, such as China and Brazil. However, this looks set to change as Morgan Stanley expects GDP to increase from an estimated USD2.2 trillion in 2017 to around USD5 trillion in 2025; and per capita annual income also forecast to rise to USD3,650 over this eight-year span. Similarly, from 2016 through 2025, the share of elite and affluent households is set to increase from 8% to 16% according to BCG. This rising affluence will undoubtedly contribute to increasing consumption overall, and on travel.
The accessibility of online information: For Indian consumers, travel is a well thought through event. A report by Google and BCG has found that the average individual spends 49 minutes over 46 days and across 17 different touch-points planning and researching before making a booking; and although they rely on multiple channels for research, most of them are online. This makes internet accessibility and reliability fundamental to the growth of India’s travel market.
A shift in payments: As well as offering increased accessibility of information, internet and penetration is critical to the future of payments. Today, cash on delivery remains the most popular payment method for e-commerce retailers in India according to Business Insider. Due to fraud risks consumers are hesitant to use credit cards online. However, it is not the most accessible method, and requires the individual to be present in person. Often this means multiple payment attempts are made.
LCCs improve the affordability of travel: Another critical driver of the growth of India’s travel market has been the reduction in the cost of travel. According to the Times of India, Airfares at the start of the second quarter of 2017 were around 6% lower than a year ago. Similarly, Skyscanner Travel Insight data found that the average price of trips dropped almost 13% between 2015 and 2017. Largely, this decrease in cost has been driven by the emergence and expansion of low-cost carriers (LCCs), which Visit Singapore says have provided travel access to a broader population segment (Visit Singapore).
Improved infrastructure and investment offer a promising future: Given the promising forecasts for India’s travel market, it is not too surprising that regional investments in fleets and airports have been made. Boeing has projected that there will be demand for 2,100 new planes in India over the next 20 years – more than 5% of the total global demand for aircraft. Similarly, Airbus has identified India as the single biggest market for its A320neo aircraft, and the company forecasts demand for 1,600 new planes of all types in India over the next 20 years. The Airports Authority of India (AAI) has planned development works at Lucknow, Deoghar, Rajkot and Allahabad airports to improve and develop infrastructure. AAI will construct a new integrated passenger terminal building at Chaudhary Charan Singh International Airport, Lucknow, at an estimated budget of US190.65 million. It will have capacity for 4,000 passengers per peak hour and 6.35 million passengers a year.
Opportunities and next steps
The Skyscanner Travel Insight and industry data highlights just how promising the India travel market is – and the growth it’s set to achieve in the future. Undoubtedly entering and/or increasing your investment has the potential to deliver substantial returns.
The question is, what approach should you take?
To read the full report, visit: India on the rise: Growth ahead for one of the world’s leading aviation markets.
Mr Aitken, was a guest speaker at the CAPA 2018 India Aviation Summit this week. To attend future events visit centreforaviation.com/events