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IMPACT of CIVIL AVIATION STRATEGIES on TOURISM in INDIA Shivam Shukla1, Dr

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IMPACT of CIVIL AVIATION STRATEGIES on TOURISM in INDIA Shivam Shukla1, Dr IMPACT OF CIVIL AVIATION STRATEGIES ON TOURISM IN INDIA Shivam Shukla1, Dr. Mini Amit Arrawatia2 1Research Scholar, 2Research Supervisor, Department of Management and Humanities, Jayoti Vidyapeeth Women’s University, Jaipur, (India) I. INTRODUCTION This study provides to aviation industry stakeholders and tourism authorities with the necessary information regarding priority areas for the development of civil aviation in India and identifies appropriate actions that need to be taken going forward. The study has been initiated by the Department of Tourism Government of India II. OBJECTIVES The objective of the study is to aid industry stakeholders in resolving issues presently facing the aviation or tourism transport industry and guide in improving policies investment and business decision making within and related to these sectors. This document deals specifically with issues regarding air seat capacity and strategies for air services negotiations. The overall aim of this report is to present a case to secure adequate seat additional capacity with a focus on India‘s key source and destination markets. The Consulting Team defines adequate seat capacity to be the extent to which supply matches current and anticipated demand and need in the most cost-effective way. This report also presents and evaluates via an econometric model the direct, indirect and induced impacts of India‘s international aviation arrangements on the market for air travel to and from India. Specifically the consulting team has modelled the competitive effects of incremental seat capacity on prices employment and net tourism. Finally it examines the issues surrounding the proposed liberalisation of India‘s policy for civil aviation and provides a suggested policy option plan for the continued development of the Indian civil aviation industry and including the pace and extent to which the policy should be liberalized and the potential effect of that liberalisation on the Indian economy, airline and tourism sectors. This review does not cover policy issues for airfreight. Furthermore it is not the intent of this review to raise issues relating to aviation safety technical aspects or environmental concerns and therefore these areas are specifically not dealt with in this report. III. BACKGROUND TO THE STUDY 3.1 Objective The purpose of the study was to identify and analyse the effect of current civil aviation policies and practices in India and to assess the economic impact such barriers have on The Civil Aviation industry in the country 218 | P a g e The Tourism industry in India with a focus on the International tourist Capacity & Load Factors Airport facilities in the country Capacity & Load Factors To make recommendations on suggested civil aviation policy based on researched economic data to promote Tourism in India. Recommendations and suggestions on changes that may be considered for implementation on: Tariff Structures and Pricing Air Services Agreements Tax impacts on air travel Seat capacity augmentation It was originally intended that this study addresses both International and domestic civil aviation issues. However the DOT was of the opinion, with which the consulting team concurs that issues relating to Bilateral be concentrated upon as domestic civil aviation issues follow a different set of policies that have post liberalisation been pragmatic. This study seeks to identify gaps in the current approach by policy makers to the civil aviation sector. It does not seek to address detailed points of implementation. The recommendations provided are the consulting team‘s views on what ought to be done to improve air connectivity and access to India and are presented for consideration only. IV. APPROACH In order to accomplish the objectives the Consulting Team performed the following tasks 1. Reviewed and compiled data on historical and current market trends of the global commercial aviation and tourism industry. In an effort to put India's commercial aviation and tourism sectors in context with those of peer countries the consulting team has conducted benchmarking exercises in several areas so as to identify international best practices. 2. Conducted detailed background and contextual research on key issues affecting the civil aviation sector in India including relevant statistics and trends identification of key regulatory issues and other barriers to growth including taxes and airport charges. 3. Analysed and assessed the benefits disadvantages and overall effects of the international aviation regulatory framework and the sectored effects of India's current stance to negotiating bilateral air services agreements for the tourism and the aviation industry. 4. Reviewed the current regulatory / legislative framework in which international air services operate including multilateral as well as bilateral structures and the objectives of the framework. 5. Identified options for efficient and effective delivery of tourism related infrastructure and transport services. 219 | P a g e V. THE PRICE EFFECT ON DEMAND FOR AIR SERVICES A steady fall in real prices of airfares has contributed substantially to increased air travel. While GDP growth and falling prices (in real terms) alone may not be representative of air traffic trends at the regional or country level, they do depict aviation trends at the global level. Over the past four decades there appears to have been a change in the balance of importance between GDP and real price factors. During the period 1960-1990 some 80% of traffic growth was explained by GDP growth, with 20% due to price reduction, in the 1990‘s this appears to be nearer 60% and 40% respectively. Since the 1990‘s, price reduction has become more important as average world GDP growth rates have softened. VI. INDIA’S GDP Vs TOURIST ARRIVALS In India GDP growth in the period from 1996 to 2001 (the post Hindu rate of growth period) has been on average 6.28% whereas the annual compounded increase in inbound and outbound international traffic has been 4.8% and 2.4% for domestic traffic. India is now on a ‗roll‘ with a visibly strengthening economy and expectations of significantly higher rates of GDP growth. It is imperative that this not be constrained by insufficient international seat capacity to and from the country. This is the main thrust of this report. The Indian economy will only achieve its economic potential if we are able to compete in the industries of the future. We need to be strong in the areas with the potential to grow rapidly and this includes the aviation industry itself. The demand for air transport has risen strongly over the last 25 years driven by falling real prices and rising incomes. VII. COMPARISONS OF INDIAN AIR TRANSPORT ACTIVITY Countries with developed economies exhibit higher levels of air transport activity. In these countries the relatively higher disposable per capita income results in the propensity of people to spend on air travel. An increase in airline activity can therefore provide a useful indicator of the progress of a nation‘s economy. As may be seen by the illustration given below India lags far behind not only the developed economies but even in comparison to peer nations such as China and Pakistan. VIII. GROWTH OF TOURISM IN INDIA Key drivers & trends the growth of the Indian travel and tourism industry is being impacted by several industry drivers. Domestic Tourism Changing consumer lifestyles Healthy economic growth and rising income levels Availability of low cost airlines Easy finance availability Diverse product offerings 220 | P a g e Inbound Tourism Rich natural/cultural resources and geographical diversity New product offerings Government initiatives and policy support Healthy economic growth levels Multiple marketing and promotion activities Host nation for major international events Outbound Tourism Attractive tour packages Rising disposable income with the Indian consumer Healthy economic growth International events and increased business travel Easy finance availability 1. Healthy economic growth and rising income levels: Favourable growth in the Indian economy, rise in middle class population and increasing levels of disposable income with increased affinity for leisure travel are some of the driving forces. 2. Rich natural/cultural resources and geographical diversity: With 28 world heritage sites 25 bio-geographic zones along with a 7000 km10 long coastline India abounds in natural resources and offers a rich cultural heritage through multiple religions, traditions, fairs and festivals. 3. Easy finance availability: Increased adoption of credit culture and availability of holidays on Equated Monthly Instalments is another growth driver. 4. Host nation for major international events: India is fast emerging as the preferred nation for hosting of major international events such as the Commonwealth Games held in 2010. Meetings Incentives Conventions and Exhibitions (MICE) tourism is on a rise on account of increased business travel in India. IX. AIR TRANSPORT DRIVER OF ECONOMIC GROWTH (WORLD) Air transport is a driver of economic development. The economic stimuli of airlines, airports and their direct affiliates beyond their direct impact can be expressed using output and employment multipliers. Every $100 of output produced and every 100 jobs generated by air transport trigger additional demand of $325 and 610 jobs in other industries throughout the global economy. More than four and a half per cent of world economic output may be attributed to civil aviation.
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