India Tourism Report Q1 2009

Tourist Arrivals On Track For Target Data released by India’s Ministry of Tourism in November 2008 indicate that foreign vistitor arrivals continued to grow strongly in the first 10 months of the year, despite the slowing global economy. In total, 4.32 million visitors arrived in India between January and October, up by 9.4% y-o-y. This was also positive for foreign exchange earnings, which rose by a higher 17.1% y-o-y to total INR40,712 crore over the period.

This growth rate represents a slight slowdown from double digit arrivals growth in the first two quarters of the year. However, given the global economic slowdown and the regional diversion effect of the Beijing Olympics in August, we view growth of 9.4% y-o-y as highly positive. Indeed, given that tourism arrivals within the region as a whole are beginning to slow, it is encouraging that India continues to post such strong sector growth. We view this relative resilience as the result of long-established links between India and its chief tourism markets, the US and the UK. In addition, visits by Indian nationals living abroad, which traditionally spike during the Western hemisphere summer season, have also offered support to arrivals figures. As such, we remain positive regarding the prospects for full-year growth, and maintain our forecast for arrivals of 5.2 million. Looking ahead, we expect tourist arrivals to continue to moderate in 2009, as the global economic slowdown weighs on the global travel and tourism industry.

However, we expect India to continue to be one of the top global performers, with sector growth likely to remain one of the highest in the Asia-Pacific region.

India Focuses On Cruise Sector Potential The government is seeking to encourage stronger growth in the cruise sector, in order to exploit the potential of India’s long coastline. Tourism Secretary Shilabhadra Banerjee announced that the government is targeting stop-off arrivals of 10 million by 2010. Banerjee added that achieving this target would imply an inflow of US$9 billion in revenue, and the creation of 15 million new jobs.

While this target appears somewhat optimistic, especially given the deteriorating global tourism environment, boosting India’s cruise sector would offer valuable support to the industry. India has a varied and extensive coastline, which to date has not been exploited in terms of cruise potential. As such, the government has stated that it will seek to improve cruise infrastructure, encouraging a diversification from concentration on cargo ports to those more oriented towards tourism. As part of this plan, it will set up cruise terminals at Chennai, Mumbai, Goa and Kochi, and reform the tax on bunkers systems to provide more incentives for investment in the cruise industry.

Jet Airways Reports Major Losses Mumbai-based airline Jet Airways announced a July-September quarterly loss of INR3.85 billion (US$77 million), its largest quarterly loss since 2005. This compared to a profit of INR283.6 million in the same period the previous year. The airline noted that this loss was largely due to the surging price of fuel, which rose by 69% during the quarter. In addition, the slowing economy and tighter credit conditions reduced the demand for air travel, with the Civil Aviation Ministry announcing that local passenger traffic fell by 8% m-o-m in September, to 2.68 million. The airline is now expected to post a full-year loss (to March 2009) of INR1,890 crore.

In expectation of a more difficult operating environment into 2009, Jet Airways has put its expansion plans on hold, postponing delivery of some new aircraft and grounding others in order to save costs.

Moreover, the airline laid off 1,900 of its 13,200 employees in October and is reportedly considering cutting salaries by up to 20%. In October, the airline also announced an alliance with long-term local rival Kingfisher Airlines, which is hopes to save the two airlines up to INR15 billion by reducing duplication of routes and sharing resources.