Thomas Cook eyes complete recovery of international biz

Supply-chain constraints for airlines have eased post-covid, but input costs such as labour and fuel remain high and are trending upwards, particularly for international flights. Yet, Thomas Cook (India) looks to make a complete recovery in its international business, Iyer told Mint.

Domestically, airfares have softened by 8-10% compared to previous years, but on international routes, they are still 20% higher. It may take 12-18 months to see some moderation in airfares as demand increases. “Airlines, as a model, find it difficult to make money. We know that 1,200-1,500 new aircraft are coming in, so they want to ensure that they have higher price points so they continue to get better yields,” he said.

It’s a loss-making proposition for airlines to fly with empty seats, often prompting them to hike fares to break even. A high load factor ( percentage of available seats on an aircraft that’s filled) leads to moderate fares.

Iyer added that there was still a considerable wait time in 2024 for visas for Schengen countries (Europe), and there were still challenges in handling the high demand from Indian travellers. There were also higher-than-usual visa rejection rates of 16-18%, jumping from 5-7% before the pandemic. There were also some delays in the US visas last year. As much as 70% of the company’s outbound travel business at the portfolio level comes from these two geographies. However, he expects some increased travel to Europe from India now due to changes in Schengen visa rules, including allowing applications to be made six months in advance, instead of just 30-60 days previously.

In the calendar year 2023, the company’s holidays business at the portfolio level recovered 65-70% of its pre-covid volumes. Long-haul travel out of India for the company was sub-50% in recovery in CY23 – and this year, by March 2024, the business has already recovered to 65-68% of its pre-covid numbers. The short-haul travel segment in 2024-25 out of India is already at 100% and domestic travel has peaked and will reach 2x of pre-covid levels by March 2024. “India is a very big market as far as a lot of these countries in Europe are concerned. China is also not fully back yet. So, they are looking at India to fill up the gaps in their respective countries in terms of numbers. So I think to that extent, we will see this year to be the full rebound of the long haul and grow too,” Iyer added.

A lot of the outbound travel demand from India is also being fulfilled by low-cost carriers and younger travellers are fine with the no-frills travel so long as they get favourable prices on the airfares. “People who have just got into the earning curve are not looking for a flatbed when they travel. They want low- to no-frills seats with attractive price points and IndiGo has a big role to play. So will Akasa in the future. So, will we see outbound airfares from India going down in the short run? No. But maybe after 12-18 months,” he added.

Since India is likely to become the third-largest economy in the world within the next 24 months, he said there is a strong focus on domestic opportunities in consumer-facing industries like hospitality. This is because India’s economy and infrastructure development continue to gain momentum. But since infrastructure building in India takes a long time — sometimes anywhere between 5 and 7 years to make a hotel — the supply of new hotels will increase, but demand will still be disproportionately higher than the supply.

“We are now also seeing a strong government vision for tourism over the next five years. We are talking about religious circuits being created, huge-scale meetings coming to India – weddings and incentive business staying local. Take for instance, the huge demand in locations like Dwarka and Ayodhya. Ayodhya, for instance, is getting as many as 1.5 lakh visitors a day. This means it would become the number one visited tourist site in the world, surpassing the Vatican. The government is also focused on bringing 50-60 large-format global meetings to the country each year, which will drive a lot of business and create a better tourism infrastructure. We know already that for every traveller travelling, there is a multiplier effect of seven jobs that are being created,” he said.

For the quarter ended December 31, the company reported ₹4.26 billion in revenue from operations, growing 26% from ₹3.33 billion in the same period a year ago. Its net profit was ₹11.03 crore in Q3 of FY24, swinging back from a loss of ₹11.69 crore a year ago, the company said in an exchange filing.

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Published: 20 Mar 2024, 04:29 PM IST