After suffering a severe slowdown in Q109, India’s tourist industry appears to be showing nascent signs of improvement. Data released by the Ministry of Tourism indicates that tourist arrivals grew by 0.6% year-on-year (y-o-y) in July, marking the second month of consecutive arrivals growth, after June recorded 0.2% growth. Tourist arrivals in July totalled 429,000, up from 341,000 in June. In total, arrivals in the first seven months of the year reached 2.4mn, down 3.3% from the same period in 2008. As a result, tourist revenues have also fallen, totalling US$6.0bn in January-July, down from US$7.3bn in 2008. While it is positive that tourist arrivals have returned to growth, albeit minimal, we remain cautious about the prospects for India’s tourist industry in 2009.

The rising arrivals during the Western hemisphere summer reflect the traditional cycle of tourist arrivals to India and we believe that arrivals will slow again once the summer holiday season is over. Tourist arrivals will then begin to rise again around the Christmas season, although this may not be sufficient to compensate for the sharp falls in arrivals earlier in the year. As a result, we continue to expect a decline in tourist arrivals in 2009, forecasting arrivals of 4.8mn, down from 5.5mn in 2008. On Track For 2010 Commonwealth Games With India’s tourist industry only likely to recover in 2010, the holding of the 2010 Commonwealth Games in New Delhi will provide a valuable boost.

Despite concerns that the economic slowdown would damage preparations for the games, it appears that the programme remains on schedule. In July, the chairman of the Organising Committee Commonwealth Games 2010 Delhi, Suresh Kalmadi, stated that 90% of the stadiums would be ready by the end of December and that the remaining two would be completed by March 2010. Infrastructure improvements are also on track. By the time the Games open in October 2010, a new metro line from the airport to the Games Village and the main sporting venues will be operational. In addition, a new high-speed ring road will link the Games Village and the main Jawaharlal Nehru Stadium, while a new eight-lane expressway from Gurgaon to Delhi is already complete. As with the Olympic Games in Beijing in 2008, India will be hoping to attract visitors beyond the two weeks of the games’ duration, with the aim that Delhi will function as a base from which tourists will explore other parts of the country.

Kingfisher Airlines Continues To Suffer - Underlining the ongoing problems in the global airline industry, leading Indian carrier Kingfisher Airlines posted a loss in the first quarter of FY10 (April 2009-March 2010). In this quarter, the airline made losses of US$50mn, following a loss of US$33mn in Q4 FY09. The airline made substantial efforts to reduce costs, lowering capacity by 23% in the first quarter. Moreover, revenue losses slowed, falling by only 6.0% annually, to US$273mn. This indicates that Kingfisher’s efficient drive is reaping rewards, although the adverse external environment means that these are not likely to be felt until 2010. Fellow airline Jet Airways is also suffering, posting losses of US$47mn in the first quarter of FY10. Although Jet has made strenuous efforts to cut costs, they have not yet proved effective, with costs excluding fuel rising by 15% on the quarter. However, encouraging news came from Jet’s low-cost subsidiary SpiceJet, which returned to profit in Q1 of FY10, with a profit of US$5.5mn, compared to a loss of US$26.8mn in the previous quarter.