Indian Railways all set to give a hit to troubled Airlines with improved services

New Delhi: With India’s rail sector working hard to raise its game, with everything from online sales to shorter queues and WiFi in stations, what does that mean for troubled airlines? Sally White reports

A mess or a travel revolution? In India airlines are fighting other airlines and all the airlines are fighting rail. Profits are a slither and infrastructure is poor. Airline industry figures put their accumulated debt at around $15bn and the flow of red ink is expected to continue. And what is winning at the moment? Rail!

Indian rail is getting $137 billion over the next five years in the government’s 2015-16 Rail Budget.  Of course, railways is also loss-making mainly due to popular nautanki played by erstwhile Railway Ministers.  However, since it is state-owned and capable of running int0 profits due to clinical measures taken up by Modi Government, IR is expected to run into profits shortly. Moves to boost the mega number of rail passenger numbers include further incentives such as promises of modernised facilities, frozen fares and easier booking (120 days ahead online). Hence, the surprising discovery of a prominent presence of rail on the sites all online travel companies.

Rail tickets make up over 39% of the online travel market, according to financial group Motilal Oswal’s report on Indian e-business – that compares with 50% for domestic air travel. Indian Railways had already implemented an e-ticket booking initiative by the time low-cost airline companies started their online ticket booking schemes.

A Euromonitor International’s 2014 survey covering Indian online travel put the increase in online rail bookings at 300% over the last year. That made it the country’s fastest growing sector in online travel.

The increase in bookings via online travel agents has been one of the main drivers of rail online sales growth over 2012-2014, the report says.  Also, many foreign travellers in India prefer to book train tickets online through online travel agents as Indian Rail accepts only American Express credit cards from international tourists.

Cutting queues could hit airlines

To cut queues at stations Indian Rail has made big efforts to encourage online sales. It has launched a mobile app for bookings, train schedules and real-time train status updates, according to the report. And since 2013, rail bookings have also been possible from non-internet mobile phones through SMS messages. Also, ClearTrip has created “a specific, very successful app to book rail tickets”, notes the report.

The new train advance booking time, twice the old one, is expected to hit the airlines. “There is a clear overlap and so there will be some negative impact on air ticket sales,” Samyukth Sridharan, Chief Operating Officer of commented.

The 120-day booking window will allow customers to decide well in advance on their travel plans and book other services as well, cutting their holidays costs. Secondly, it will undermine the airline’s discount sales offers as low fares were primarily aimed at budget traveller, who travelled by train.

First introduced in 1853 and featuring hugely in tales of 19th century India, rail is now a $26 billion a year business, according to government statistics. The fourth largest in the world it carried 8.5 billion passengers last year. One clue to its importance is the number of employees – 1.3 million – making it one of the world’s biggest employers.

By contrast, air passenger numbers from industry consultants CAPA India put 2014’s domestic passenger numbers at just over 60 million and international passengers at around 46 million.

India’s airfares are already often cheaper than trains but the price wars are slashing them further. The market is positively littered with discounts and ads puffing air over rail! India must be the cheapest place on earth to fly. According to GoEurope airline travellers pay an average $10.20 to travel 100 kilometres, half as much as Chinese travellers.

No wonder airlines are going bust (Kingfisher Airlines low-cost carrier SpiceJet is looking at a bailout from the government in order to survive). And no wonder passenger numbers are rising! Aviation services group, Bird Group, has been quoted as saying that 300 million Indians can now afford to fly, yet only a relatively small proportion do so. Holding them back, it says, is the lack of flight availability and of airports.

The government is moving on both fronts. It has pledged to build 200 low-cost airports in Tier-II and Tier-III cities across the country over the next 20 years to boost regional connectivity. There are government plans to list Airports Authority of India – the state-owned airport operator – to help increase efficiency and improve transparency.

The Minister of State for Civil Aviation Mahesh Sharma has announced six new airlines and bigger foreign players are coming in. One of the new entrants is a joint venture between Tata Sons and Singapore Airlines (SIA). Tata also has a deal with AirAsia. Abu Dhabi-based Etihad Airways has taken a 24% stake in Jet Airways, India’s second largest airline by market share.

Nor is that the least of the government’s efforts. Railways Minister Suresh Prabhu told last month that the government would introduce WiFi in stations. It would also, he said, train the notoriously surly frontline staff in ‘soft skills’ including yoga, seeking to make travelling on India’s railways a more pleasant experience.