A charter for change

Travel agent Balbir Mayal isn't wasting any time. For the last seven days, Mayal, the managing director of New Airways Travels, has been working the phones and sending off a flurry of e-mails to travel agents and tour operators in Sri Lanka, Bangkok and Malaysia.

He's hoping to be one of the first travel agents to put Indian citizens on regular charter flights out of India.

Mayal will have plenty of competition. The entire travel industry has been thrown into a frenzy of action ever since the Government announced that it was radically altering the rules on charter flights in and out of India and throwing open the market on an unprecedented scale.

Take Stic Travels which takes large numbers of Indians on foreign tours. Its peripatetic chairman Subhash Goyal is already talking to counterparts in Europe and Asia about organising charter flights on a large-scale.

It's the same at Kuoni the country's largest package tour operator. Ranjit Malkani, CEO, Kuoni Travel Group, India reckons that his company is well-positioned to seize the new opportunities that have just been thrown up. Kuoni has already hired a consultant to work out its future moves.

What's the excitement about? For Indian holidaygoers foreign travel is just about to become a whole lot cheaper - if they are willing to fly by charter flights and travel in groups.

Most industry experts say the cost of tourist packages to any part of the world could drop by a whopping 30 per cent to 40 per cent.

In the long run that will have a huge effect on the Indian tourist industry. Ashwini Kakkar, CEO Thomas Cook, for instance believes there will be initial hiccups but once these are sorted out it could have a huge impact.

"In Western countries charters account for 20 per cent of travellers especially holidaymakers. In India the possibility of at least 1 million people travelling is how we assess the potential."

Other travel agents are equally upbeat. Says Goyal: "We expect about 5,000 seats a week on charters in the peak seasons easily. We see a new class of Indians who could not afford going abroad now getting into the ambit."

Adds Mayal, who is also president of the Travel Agents Association of India: "We expect charters to carry about 10 per cent of the tourist volumes from India."

What are the new fares the travel industry is talking about? Industry experts point out that a two-way ticket from Delhi to Bangkok, which costs around Rs 19,000 will be on offer on a charter flight for around Rs 12,000. Many experts expect tour packages to parts of south east Asia to fall by $150 to $200 per passenger.

While that's great news for would-be Indian travellers, the new rules should also bring a new flood of tourists into India.

The Government has laid down a criterion that tour operators must bring in two tourists by charter flights for every one Indian who flies abroad by charter.

Raj Travels, Goyal, Mayal and scores of other travel agents are busy striking deals with their foreign counterparts to ensure that this happens.

The fact is that the Government's new charter policy should trigger a revolution in the Indian travel industry and it could send tourist figures into the country soaring.

High airfares to India have been one reason why the travel industry has been condemned to slow growth over the decades.

The Government, for reasons best known to it, has always been wary of charters. It has, in fact, allowed charters for several years. But it put a ring-fence of restrictive rules around the charter business - especially outbound charters "" that made it almost impossible to operate economically.

Now, tour operators can take Indian passport holders on charters without any restriction on the size of the aircraft or the frequency to any location across the world "" as long as they bring in two passengers for every Indian passport holder who goes out.

Also, the charter must only be for tourism purposes and tourists have to pay for the entire package before they board the plane. They will also have to stay abroad for between one week and four weeks.

This isn't actually a complete turnaround for the Government. For several years now tour operators have been given the right to take Indian passport holders on outbound tours. But they were only allowed six flights in 90 days and this made charter flights an uneconomic proposition.

The Government has also thrown open the charter business in other ways. It has removed all restrictions so that non-resident Indians holding Indian passports can now travel on inbound charter flights "" this wasn't allowed till now.

Also the aviation ministry has promised that inbound charters would be allowed at several smaller airports across the country. It has even promised that in some smaller airports immigration infrastructure will be quickly put in place to cater to new groups of travellers.

This could open up entirely new markets. Till now most charter flights to India have been to Goa and a few have flown to Thiruvananthapuram.

"With the government promising infrastructure in other places and allowing NRIs to take charters inbound I think charters will come to new markets like Gujarat and Amritsar, amongst others," says Ankur Bhatia the Indian chief of Amadeus an international reservation system.

First off the mark will be the big operators like Kuoni and Thomas Cook. These two companies already bring in about 70,000 inbound charter passengers. So, they are automatically entitled to take half that number out of the country.

But the others are racing to catch up. In Mumbai Raj Travels, for instance, is looking at the possibility of taking charters to places like Sri Lanka and Egypt and numerous other destinations.

Says Archan Oza, sales and marketing manger, Raj Travels and Tours: "Destinations like the Far East, parts of South Africa, Europe and Mauritius will do extremely well."

"Our estimate is that the top three tour companies can easily operate a minmum of 24 flights each in the three peak season months carrying around 30,000 passengers without any difficulty," says Kapil Kaul aviation expert and senior vice-president in the Centre for Asia Pacific Aviation, a company that advises on aviation and travel.

The fact is that the new policy makes good business sense for the travel companies. Charters are substantially cheaper than scheduled airlines.

For a start, unlike scheduled airlines charter operators do not have to incur large infrastructure and staffing costs. Two, charters don't take off unless 80 per cent of the seats are filled.

Those aren't the only savings. Meals on charters are often charged separately.And most charter operators save costs by landing in smaller airports and at odd hours when landing and parking costs are cheaper.

But there are many who believe that the policy is still restrictive and may end up benefiting a few big players.

Laments Mayal: "In India 95 per cent of the tour operators do not have both inbound as well as outbound business except big names like Kuoni or Thomas Cook. They will be the chief beneficiaries of this policy. The 2:1 ratio between inbound and outbound travellers will make it tough for the smaller players."

There are other challenges too. Outbound charters must obviously start from one of the metros. But inbound charters land in places like Goa or other tourist destinations. So travel agents will find it tough to use the plane that bring inbound tourists for outbound journeys.

Says one travel agent:"That would have reduced costs but it's not viable." Also, the peak seasons when Indian travellers is between April to July. That's different from foreign tourists who come between October and January.

In most countries charter flights have been the key to growth of tourism in the country and is already a booming business. The question is whether the new policy will be the ticket to big growth.

Dogfight over open skies

India's private airlines are ecstatic at the possibility that the Government may allow them to fly to foreign destinations but IA and AI say they are being dealt a death blow

The dogfight has begun even before the planes have taken off from the ground. On one side are the private airlines like Jet Airways and Air Sahara which are cock-a-hoop over the government move.

On the other are the Govenrnment-owned carriers like Air-India (AI) and Indian Airlines (IA) which reckon they've lost the battle even before a shot has been fired.

What's the Government move that has triggerered these violent reactions? It has prepared a cabinet note which, if cleared, will allow private airlines to fly on lucrative routes in south east Asia and the Middle East.

This move comes close on the heels of an announcement a few months ago which allowed the private airlines to operate flights to Sri Lanka and other Saarc countries.

"The move will bring in more competition and offer customers a varied choice," says a jubilant U K Bose, CEO, Air Sahara which is waiting for the detailed regulations to be published before it takes off for the Emerald Isle.

Inevitably, the move has infuriated executives at the state-owned airlines which earn the lion's share of their profits from the Gulf and Far East routes.

The airlines haven't been allowed to expand their fleets for over a decade and this, they say, has handicapped their fight against the aggressive private airlines.

"By allowing private domestic airlines to fly and liberally giving bilateral to foreign carriers without expanding our fleet they are virtually killing the two airlines," says one executive.

That grouse is backed by statistics. IA and AI, for instance, earn over Rs 5,400 crore from international operations. If 10 per cent of the passengers move to the private airlines that would mean a hit of Rs 540 crore.

The two airlines complain that the Government has already weakened them to an extraordinary extent by handing out bilaterals liberally.

In the past three years, for instance, the government has given out 47,000 seats per week under bilaterals to foreign carriers. The lion's share of 32,400 has been grabbed by Gulf and south east Asian airlines.

In addition, the Government has now declared an 'open skies' policy for Asean carriers and Air Lanka which could result in the addition of 26,000 seats every week.

"While foreign airlines have used virtually 80 per cent to 90 per cent of these bilateral seats our utilisation of bilaterals has been as low as 40 per cent to 50 per cent because we don't have the aircraft to fly," says an airline insider.

Even the fleet modernisation programme "" if and when it goes through "" will not dramatically increase the number of seats available to IA and AI.

"For IA most of the new fleet will be used to replace leased and old aircraft. The actual increase in capacity of seats will be only 20 per cent to 25 per cent and that also after so many years," says an aviation insider.

IA officials also complain that while the government is allowing other domestic carriers to fly new routes, its request for more flights to Dubai, Singapore and Jeddah over the last three years have met with stony silence.

But many aviation experts say that the criticism against allowing domestic airlines to fly foreign routes is unjustified.

Says Kapil Kaul: "AI and IA will require more than 100 additional aircraft if they want to utilise all their unused bilaterals. Practically that is not possible considering the investment required."

However, even the private airlines could face difficulties about flying abroad. Running an international airline is a big bucks game and experts reckon that some airlines will need fresh equity capital to sustain the business.

Experts estimate that another $70 million to $100 million has to be invested by domestic airlines "" if they want a reasonable presence in international skies with at least six or seven planes.

The Government is preparing a comprehensive policy which will outline conditions that must be met before private airlines will be allowed to fly abroad.

For instance, domestic airline companies need only a paid up capital of Rs 30 crore to start operations but this may be upped for airlines that want to fly international routes.

Two, the Government could lay down that only experienced airlines can fly internationally. Also, there might be a stipulation about a minimum fleet size "" that might put put some new, smaller airlines out of the running.

Will the domestic private airlines be able to transform themselves into international operators? And is the Government about to deal the two national carriers a death blow?