Abacus’ mid-year snapshot of the Asian travel industry shows sustained demand across the region even as rising fuel bills increased real costs for travellers.

“The first half of 2006 has been a real test for the travel market, and the continuing growth shows we have come through with flying colours. We’re seeing an active and vibrant market with relatively inflexible demand even though airlines have been forced to pass on rising fuel costs to the traveller,” says Abacus International President and CEO, Don Birch.

“The rise of India and China, supported by a build up of latent demand in hotspots such as Vietnam and Indonesia and the impact of low cost carriers (LCC’s) are all making their impact felt in the emerging picture,” Mr Birch says.

“These factors have evolved from being the subject of industry conjecture over the past few years to rapidly become a real and measurable market reality,” he says.

Leadership position

The Asian region is consolidating its position as one of the most dynamic regional travel markets in the world, driven by some of the highest rates of economic growth.

IATA figures for the six months to June 2006 show an overall 6.2 per cent growth in revenue passenger kilometres (RPK) for Asia Pacific over the corresponding six months from 2005. This placed the region third fastest grower after the exceptional performance of the Middle East (17.3 per cent) and Africa (7.6 per cent).

“Even more significantly, Asia-Pacific is the most profitable region for the global airline industry with IATA projecting 2006 net profits of positive US$1.7 billion against a backdrop of an overall global airline industry loss of US$3 billion for the year.”

The region had relatively high and improving passenger load factors achieving a 73.8 per cent passenger load factor on the back of RPK growing at approximately twice the rate of new capacity.

India was a prime mover during the period (with a marked increase in domestic travel), while other growth players China Vietnam and Indonesia provided underlying confidence to the market, although Thailand and Malaysia experienced some turbulence.

India on the move

“Abacus’ statistics show that in travel terms, India is making some progress towards fulfilling its “Incredible India” marketing moniker, with new classes of leisure and domestic traveller adding to the nation’s existing strengths in corporate travel.

While India’s total market for domestic travel grew by a remarkable 24 per cent YTD June 2006, Abacus itself grew domestic booking numbers by more than three times that rate over the period.

Domestic traffic is poised to keep growing at 25 per cent per annum from 2005 to 2010. India will also add five million additional passengers every year and the market size will grow to 50 million by 2010 according to CAPA (Centre for Asia Pacific Aviation).

“Economic reforms, annual growth rates of 7+ per cent and unprecedented growth in the software and back-office service sectors have created a new, younger and wealthier middle class which will eventually be larger than the entire population of the United States as the 45 per cent of Indians under the age of 20,” Mr Birch says.

14 bilateral agreements signed by India during 2005 under its Open Skies policy are beginning to translate into more foreign airlines routing into India and previously purely domestic carriers being permitted to fly abroad - generating more seats and driving competitive fares despite increased fuel charges.

“A recent report by InterVISTAS on the economic impact of Air Service Liberalisation found typical traffic growth of 12 - 35 per cent subsequent to liberalisation and a number of situations resulting in 50 per cent plus growth providing some idea of the potential unleashed by these changes in India,” Don Birch said.

“On paper, India has some very promising developments in airport infrastructure with Bangalore and Hyderabad in line for new international airports. As many as 30 smaller airports will be re-positioned as international airports (e.g. Nagpur, Gaya) eventually creating more exit and entry points for travellers depending on the ability to drive through these changes which the jury is still out on,” he said.

The industry serving this market is getting more sophisticated with travel portals such as MakeMyTrip.com, and IndiaTimes.com starting to impact on the traditional travel agents. Portals such as these now make up more than 5 per cent of Abacus’ business in this market, up from a practically nil just a year ago.

“We expect rapid growth in India’s online travel market with more than 100 million internet users expected by 2007/8 and IAMA (Internet and Mobile Association of India) projecting travel and related services to account for more than 55per cent of all online purchases,” Mr Birch said.

The Low Cost Carrier (LCC) category is very dynamic in India, with three existing low-cost operators helping to maintain the momentum of traffic growth and develop new destinations while a further five start up operations are lined up for 2006.

It is projected that LCCs will increase their market share to 30-35 per cent in 2006 and will likely to push the bounds further with Centre for Asia Pacific Aviation projecting that this category will capture 60-70 per cent of the Indian market by 2010.

Other sectors of the travel market are well poised to capitalise on the increase in air travel with HVS International reporting 40,000 hotel rooms currently under planning or construction to enter the Indian market by 2009.

In other developments in this region, Abacus recorded more than 50 per cent growth in FIT bookings for the neighbouring Pakistan market, making it the star market in South Asia for YTD June 2006.

China’s charge

Latest Abacus figures show a compound average growth rate of 37 per cent over 2003 to 2006, including 12 per cent YTD growth in May 2006 consistent with the 12 per cent growth rate for the total Global Distribution System (GDS) market in China over this period.

Linda Koh
Manager, Marketing Services
(65) 6426 0616
Abacus International Pte Ltd