Mumbai: More than half of domestic airline tickets sold in India will be online by end of this year, predicts leading travel industry research firm PhoCusWright Inc., up from 43% in 2007.
In value terms, India will sell 43% of all airline tickets through online channels by 2010-end, said the Connecticut, US-based firm that studies how travellers, suppliers and intermediaries connect. Airlines in India are trying to increase tickets bought online, partly to save on commission paid to travel agents, but such bookings account for just about 15% in value today.
Separately, carriers, expected to make losses of up to $2 billion (Rs9,304 crore) in 2008-09, plan to abolish the 5% commission on tickets paid to travel agents from 1 November to reduce distribution costs.
Selling and distribution cost for country’s largest private airline Jet Airways (India) Ltd increased by nearly 23% to Rs982.9 crore in the year up to 31 March, up from Rs800.8 crore in fiscal 2007. It reported an increase of 15.7% in commissions to travel and general sales agents from Rs558.9 crore in fiscal 2007 to Rs646.7 crore in the fiscal year just gone by.
PhoCusWright believes India will evolve a franchisee model for travel agents in a commission-free environment, given high real estate costs, increased wage inflation and staff attrition. Retail outlets “won’t be owned by big brands and a franchisee model will make more sense,” said Ram Badrinathan, senior director (research) with PhoCusWright.
Moving to the Web: Counters of domestic carriers at Delhi airport. In value terms, India will sell 43% of all airline tickets online by 2010-end, according to travel industry research firm PhoCusWright. Madhu Kapparath / Mint
“It is romantic to think that the high street travel agent can compete with an online travel agency or the online channel in India to research plan and buy travel. The ability to fight scale, technology, innovation, marketing, execution, strong management and the force of the Internet is next to impossible in a deregulated travel market like India,” Badrinathan said.
Christopher Vasiliou, president and chief executive of Bethesda, US-based Radius, among the world’s largest travel management firms, said travel agents will be forced to embrace changes and could benefit from the real-time advantages the Internet provides. “Internet will enable travel agents to bundle lot of services and offer a dynamic pricing,” Vasiliou told Mint on a recent visit to Mumbai.
In several matured travel markets such as the US, Canada and western Europe, airlines do not pay the standard 5% commission, but travel agents charge a transaction fee from the ticket buyer. At present, in India, airline managements and travel agents are holding talks on the issue of transaction fee as a part of the ticket.
Unlike other markets, tickets purchased online cost the same as paper tickets bought through travel agents in India, but one airline said that would change soon.
“We are keen at increasing ticket sales through online. For sure, there will be more cheaper tickets if you book through online after November,” said a full service carrier executive on the condition of anonymity.