Surajeet Das Gupta: More planes don't mean more tourists

The country's hotel industry, which is looking forward to an even larger inflow of tourists once private airlines like Jet and Sahara begin their flights next month to south-east Asia, would do well to keep their hopes down.

For while the government cleared the proposal to break the monopoly of the PSU twins, Air India and Indian Airlines, over international flights on the grounds that this would promote tourism, this is not borne out by the facts.

The facts are that while the number of bilateral agreements that control the number of passengers that can be brought into India by various airlines (and out of those countries by Indian carriers) have increased manifold over the past four years, the number of tourists has grown at a much slower pace.

But first, the myth of low capacity utilisation by Air India and Indian Airlines needs to be dealt with. While the greater competition that will result from Jet and Sahara flying to south-east Asia is certainly good for passengers, it must be kept in mind that the lower fare announcements we've seen so far are off-season offers.

When the government cleared the Jet/ Sahara plans, it said that the utilisation of bilaterals by Indian Airlines and Air India was a mere 30 per cent.

This, however, is not exactly true. India has a large number of bilaterals signed with countries like Uzbekistan, Kazakhastan and other Central Asian republics, but these are not large enough for any airline to want to fly there "" as on date, India has bilaterals with nearly 100 countries.

So, a more realistic thing to do would be to calculate the utilisation of bilaterals in the major markets. Utilisation of bilateral by our national carriers in the top 20 countries that really matter for business is over 62 per cent.

And this has to be seen in the context of the fact that the utilisation levels by foreign carriers in these markets (the US, the UK, south-east Asia, the Gulf, Germany, Canada, China and Nepal) is 79 per cent.

The current utilisation of entitlements in the Gulf, including the UAE, is over 90 per cent. The figure is 97 per cent for Germany, 84 per cent for Saudi Arabia, and 74 per cent for the UK (just before the government signed a new agreement under which the number of flights will be hiked from 38 to 80 per week).

Utilisation of bilaterals, however, is pretty poor for south-east Asia (between 27 and 51 per cent for various countries). The fact that the last time Indian Airlines or Air India bought a plane was nearly 10 years ago also has a large role to play since both airlines are woefully short of planes.

While Indian Airlines is upset that it was not given permission to fly to the UK and the US "" where the demand outstrips supply by a great amount "" the private airlines are upset they haven't been allowed to fly to the lucrative Gulf region. Essentially, the aviation ministry retains its role of Godfather, free to allocate who will get what share of the pie, and when.

If fares drop dramatically after the new private carriers start flying international flights this will certainly arouse tourist interest, but whether this will necessarily translate into more tourists depends upon a lot more factors, such as the cost of hotels in India and the overall tourism infrastructure that includes poor quality airports, among others.

Over the past four years, for instance, the hike in the number of airlines flying in to and out of the country has not resulted in a commensurate hike in the number of tourists into the country.

The total seats under bilateral agreements between the Gulf (including Dubai) and India, for instance, has gone up by around 70 per cent since 2000, taking the total number of passengers travelling between the two areas to around four million "" the number of tourist arrivals in 2002-03 was a mere 40,252!

According to industry estimates about half of the passengers were Indian residents travelling between the two regions. And the rest, around 1.9 million, were using the Gulf as a hub to travel to other countries like the UK and US, for instance. That is, if a Gulf airline flies more planes into India, these will mainly have passengers flying to south-east Asia, and not tourists into India.

A similar story is repeated in virtually every country. While both Indian and Singapore carriers have a capacity to carry over a million tourists from Singapore each year, under 50,000 tourists came in from Singapore last year.

There were 63,000 tourists who came in from Malaysia against aeroplane seat capacity of over five lakh during the year. So planes coming in from Singapore and Malaysia to India simply picked up passengers from India on route to destinations like Europe or the US.

Allowing more competition on various foreign sectors, signing more bilaterals, and (when it happens finally) buying more planes for both Indian Airlines and Air India is a good thing for consumers but it will take a lot more than just this to significantly increase the number of tourists coming into the country.