CAPA India inbound tourism report – Part 2: Air connectivity is key to unlocking India’s inbound tourism potential

6 September, 2018

In Part 1, our report highlighted the potential growth opportunity available to India's inbound tourism market. In Part 2, we look at how air connectivity is the key to unlocking this potential.

See related report: CAPA India inbound tourism report - Part 1: Holidaymakers represent massive growth opportunity for India

Indian carriers have an opportunity to grow whilst foreign network carriers are constrained

With around 98% of leisure tourists arriving into India by air, direct connectivity and availability of seats is key. India will need to ensure that Bilateral Air Services Agreements (BASA) deliver the necessary capacity to achieve visitor arrivals targets. If capacity constraints mean that airfares are expensive, or seats are simply not available, especially during the times that people want to travel, tourists will simply choose another destination.

From the perspective of BASAs, Indian carriers face no major challenge as there are significant entitlements available for services to the leading source markets. However, several foreign hub carriers from countries such as the UAE, Qatar, Turkey, Singapore, Malaysia and Thailand, which could potentially bring tourists to India on a 1-stop basis, have exhausted their entitlements and are unable to expand.

International expansion by Indian carriers over the next couple of years should stimulate inbound traffic as a result of increased capacity and competition.

Air India and Jet Airways are the two largest international operators at present, but IndiGo and SpiceJet are both planning to expand their international networks over the next 12-18 months. The re-engined narrow bodies that are being inducted into their fleets deliver longer range and lower costs, significantly expanding the number of viable routes on sectors up to 6 hours or more. GoAir has recently announced plans to venture overseas for the first time from Oct-2018. Vistara has also applied for an international flying permit and is keen to start services before the end of the year.

Major cities in China - which CAPA identified as being the highest potential market to develop - could be operated using long haul narrow body equipment. Similarly, destinations in Southeast Asia such as Vietnam (which has great potential for the Buddhist Circuit in eastern India) or Singapore and Malaysia (which have relatively higher income levels) could be opened up.

And routes from Turkey, Israel and Iran (for which wide bodies may be too large) may be viable with re-engined narrow body equipment.

Potential inbound markets that could be stimulated with long haul narrow bodies

Source: CAPA India research and analysis, GC Map
Note: Routes shown are for indicative representation purposes only

IndiGo and SpiceJet were expected to long haul low cost services next year by deploying widebody equipment on routes to Europe and Asia in the first phase, and subsequently to Australia and Africa. However, these plans may be temporarily deferred due to the challenging market conditions at present.

Potential inbound markets that could be stimulated with long haul LCC services

Source: CAPA India research and analysis, GC Map

International expansion by Indian carriers will also create an opportunity to develop stopover traffic.

The primary focus of home-based airlines will be to develop point-to-point traffic. However, as their networks increase, they will as a consequence be able to carry more connecting traffic e.g. between Sydney and London or between Tokyo and Johannesburg via India. Special packages for such travellers to stopover should be actively developed and promoted. Not only does this generate incremental visitors, but it provides visitors with a taste of what India has to offer and hopefully encourages them to return in future for a longer visit.

The majority of foreign tourist arrivals in India are from long haul source markets

In 2017, just over 8 million foreign nationals (excluding citizens of Bangladesh, who mostly crossed the border by land) arrived in India for all purposes of visit, with the US and

This is an extract from the CAPA India Inbound Tourism Report, published this week, which focuses on the leisure travel segment and the steps to unlocking its growth. To request a complimentary copy of the Executive Summary visit CAPA India Inbound Tourism Report []