Economic Survey 2017-18: Indian Railways loses out passengers to Airlines

NEW DELHI: Indian Railways has been losing out passengers to airlines in the last five years as travel by air becomes more beneficial in every possible sense, cited a report with the data from the Economic Survey 2017-18.

According to the survey, railway passenger growth has dropped by an average 0.26 percent in last five years ended 2016-17 while the number of domestic air passengers has been increasing 10 percent every year, according to aviation industry’s regulatory body Directorate General of Civil Aviation (DGCA).

Narrowing gap between the fares of railways and airlines is one of the key reasons behind this, say industry experts. For instance, a Mumbai-Delhi train ticket in AC 3-tier costs ₹2,500 and it takes 17 hours to complete the journey. Now, if one books a flight on the same route one month prior to the date of travel, the costs remain the same, according to the report which cited travel portal MakeMyTrip.

Airlines have been increasing capacity every year, which has resulted in a fall in airfares. For example, IndiGo, India’s biggest airline by market share has increased its available seat kilometres – a measure that reflects an airline’s passenger carrying capacity – by eight percent between FY12 and DFY17 to 116.94 million. As a result, the average ticket price of IndiGo has declined one percent every year since FY12 to Rs 3,721 in FY17, the report said.

However, railways have been increasing fares to boost passenger revenue growth. Its passenger revenue grew 10 percent a year between FY12 and FY17 on account of eight percent CAGR in average rate per kilometre and just two percent increase in distance travelled, according to the report.

Rail fares of AC segment increased more than 60 percent between FY11 and FY17 when indexed to 100, while airfare remained flat in the same period, the report said citing foreign brokerage Credit Suisse.

The growth in air travellers is likely to continue as average annual air trips per person in India stand at 0.06 — much lower than other emerging countries like China, Indonesia and Mexico where it stands at nearly 0.5. Countries with higher GDP per capita have higher air penetration, but the elasticity is exponential as seen from the rapid growth in air travel with increasing income levels, the report said.

Indian Railways carried 22.24 million people per day in FY17 while all domestic airlines together ferried 0.28 million per day in the same period. Railways had the largest traveller count of 8,420 million in FY13 and there on passenger growth has seen continuous moderation.