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A charter for change

Surajeet Das Gupta and Arti Sharma | January 24, 2004

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, said 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 minimum 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.

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