Airfares, hotel rates to remain high in the short term: Thomas Cook’s Menon

India's airlines and hotels sectors are not likely to see price reduction anytime soon due to the strong momentum and continued demand, said Madhavan Menon, executive chairman of travel agency Thomas Cook India (Group) Ltd.

India has seen an unnaturally high rate of airfare increases since covid. A survey conducted by the Airports Council International and Flare Aviation Consulting in 2023 said India had the most substantial rise among any other country in the Asia Pacific region to the tune of 41%. 

The UAE saw a 34% increase and Singapore, 30%. Australia too saw a 23% increase, it said. The research analyzed about 36,000 routes across the top 10 aviation markets in Asia-Pacific and West Asia. ACI represents 132 airport members managing 632 airports spanning 47 countries in the region. 

Grounding of aircrafts is also contributing to the problem. Another report by aviation consultancy CAPA India said that about 200 domestic crafts had been grounded by the end of FY24, impacting both IndiGo and Air India.

In conversation with Mint, Menon said that both major carriers, IndiGo and Air India, are focused on changing how India travels. And as a result, both airlines will become major beneficiaries of this growing cohort of travellers over the next 5-7 years.

Airline capacity around the world is not entirely back yet post the pandemic and the demand for travel has grown, as much, if not more, he said and while there is short term pain, it's a pain the whole world is "bearing" and India is no different. 

India now has a fleet of 771 commercial aircraft. Despite accounting for 200 replacement aircraft by all the airlines, there will be a 250% surge in capacity. 

Menon said IndiGo's order of wide body aircraft in March this year is a major milestone in the airline industry.

Also Read: The flip side of mega Indian airline orders, in 5 charts

"The barriers of air travel are going to start dropping once they start getting the delivery of these wide-bodied planes between 2027 and 2033. The reality is that IndiGo always combats barriers wherever it goes. But what would be interesting to see is how they adapt to long haul travel from their current model. I have no idea how they're going to adapt, but I'm sure they will. Maybe, we're talking about a full service airline with a low-cost flavour," he said.

In the next 5-7 years, Menon also expects that Air India would have also fixed most of its issues  such as maintenance and staff costs as it too will receive its new aircraft order as well. 

Last year, in June 2023, IndiGo placed the largest ever single aircraft order by any airline for 500 aircraft with Airbus. It then agreed to place an order for 30 A350-900 aircraft in April this year. Currently, IndiGo operates over 350 aircraft and the deliveries are expected to start from 2027.

Air India increased its order to 250 aircraft with Airbus as well. It increased the A321neo and A350-900 aircraft and reduced A320neo and A350-1000 planes.

“By then we expect an entirely different travel market. I wouldn't call it a replay of the China growth story but a parallel run to the China story because our travel requirements are slightly different,” he said. 

"We are going to see an explosion of Indians travelling internationally and IndiGo could become a major beneficiary of this. Air India too, will benefit equally and will suddenly become competition to all the Middle Eastern airlines and to some of the European airlines, because they will have a fleet that is much newer. Both these airlines will have new airplanes that are much newer than a lot of their competitors," he added.

Also Read: Travel sector on high as Indians line up for overseas trips, short getaways

Thomas Cook India, like many travel companies, has delivered record profits for both the quarter and FY24, it said in its earnings filed to the BSE this week. Its recovery was led by all of its businesses and geographies barring Hong Kong which have contributed to profitability, it said. 

On a consolidated level, it reflected a total income of ₹7,435.6 crore for the year ended 31 March 2024, growing significantly over last year's ₹5,111.2 crore. The company had a net profit of ₹271.1 crore for the financial year, growing massively over FY23's ₹10.1 crore.

The company has both B2C and B2B brands like Thomas Cook, SOTC, TCI and SITA and competes with online travel agencies like MakeMyTrip and Yatra Online, among others. 

The robust growth, he said, has been augmented by the fact that the periodicity of holidays has increased in India. It is not just the older set of travellers taking more holidays, but more importantly, a whole new set of travellers that have joined the travel market after the pandemic, the company said. 

The company has seen a surge in its bookings, both domestically as well as short haul in the last three weeks. 

In the parts of the country where the general election-related voting has concluded, travel is systematically picking up. “We've seen a revival in south India and Maharashtra should happen next week. There was a time when a domestic holiday was cheaper than a short haul international holiday but owing to strong domestic demand today hotels around the country are seeing rate wars,” Menon said.

"Today, a short haul international holiday may be cheaper than travelling within India and that shows us just where the demand is. People are looking for diversity too when they travel and it is not just the growth in the domestic segment but people travelling to international locations like Georgia, Kazakhstan, Vietnam, and Azerbaijan," he added. 

For many travel companies 2024 may be a bit of a let down due to lack of any important international events like last year's G20 and the ICC Men's World Cup. But he hopes this will be replaced by a resumption in corporate business. 

Spending is going up on MICE or meetings, incentives, conferences and event related travel. “Admittedly, this year is a shorter year because of the elections but we expect to make up for that shortfall of the lack of government contracts by corporate business. Depending on the government that comes into power, spending on events like the Khelo India Games should start in July.”

Menon also said that artificial intelligence is becoming a necessity in travel and many companies in the trade are in an experimentation stage. “It is going to play a fairly significant part in travel worldwide and not just today's. We're all taking it seriously and looking at our options,” he said. 

"It is early days, but sooner than later we'll figure out what to do. It will help passengers make choices as well as companies in selling better. It will allow us to also sift through our leads and improve conversion," he added.