Travel firms feel pressure as air travel demand slows
new delhi, May 25 -- India's online travel companies including MakeMyTrip, ixigo and Yatra are starting to feel the strain from slowing air travel demand as the war in West Asia, higher international airfares, and a weaker rupee hurt their air travel business in the March quarter. Aviation comprises 25-30% of revenue for these companies.
This is prompting a notable pivot in consumer behavior, with travelers increasingly shunning expensive Western routes in favor of more affordable domestic and Southeast Asian destinations.
The pressure follows seasonal weakness in aviation revenues over the previous two quarters. MakeMyTrip saw a sequential decline in air ticketing revenue in the December quarter, while both Yatra and ixigo reported softer aviation performance in the September quarter.
In March, Nasdaq-listed MakeMyTrip reported a more than 2% sequential decline in air ticketing revenue to $58.73 million from $60.07 million in the previous quarter. Revenue fell nearly 5% year-on-year.
"The decrease in revenue (year-on-year) in absolute terms from our air ticketing business was primarily due to a decrease in gross bookings (by 6.2%) primarily driven by a 1.8% decrease in the number of air ticketing flight segments and the depreciation of the Indian rupee against the dollar during the quarter," the company said in a statement accompanying its results.
Gurugram-based ixigo, owned by Le Travenues Technology, saw revenue from air ticketing business fall nearly 6.5% sequentially to Rs.95.7 crore in March quarter, against a 9% jump from the year-ago period. The company earned less from each booking, likely because of higher discounts, rising customer acquisition costs, and weakness in higher-margin international travel.
Ixigo and MakeMyTrip are yet to respond to a questionnaire from Mint.
"This was a difficult quarter in aviation for India and the world," Aloke Bajpai, chairman and managing director of ixigo, said during the company's earnings call on 21 May.
For Yatra Online, aviation business revenue fell about 1% sequentially to Rs.60.6 crore in the March quarter, although it was over 5% higher than a year earlier.
Chief executive Siddhartha Gupta said in the management commentary accompanying the results on 22 May, "Q4 was affected by geopolitical disruptions and war-related uncertainty, which weighed on international travel demand, particularly in MICE (meetings, incentives, conferences and exhibitions). Some corporate bookings were deferred or cancelled, though management expects a meaningful portion of this demand to return as conditions normalize."
The pressure on international travel appears to have intensified from March. During MakeMyTrip's post-results earnings call on 19 May, co-founder and group chief executive Rajesh Magow said travel demand for Western international destinations began weakening from March and has continued into the April-June quarter. Destinations west of India - including Europe and parts of West Asia-have been hurt by geopolitical tensions and higher costs, pushing travellers towards eastbound destinations and domestic trips.
Magow explained that since the beginning of May, shifting travel patterns have become evident. He noted that as "seasonality" takes effect, travelers who identify a problem with a specific destination make rapid adjustments, switching their plans to alternative locations instead.
Travel companies said destinations such as Thailand, Malaysia, Singapore, Bali, Colombo and the Philippines are seeing stronger demand as travellers look for cheaper, shorter and smoother vacations. Cleartrip said bookings to the Philippines have tripled this summer.
One key reason for this shift is the sharp rise in airfares to Europe. Data sourced from Cleartrip and reviewed by Mint showed fares on European routes rose between 47% and 60% year-on-year in May. A Delhi-London return ticket now costs around Rs.1.15 lakh, compared with Rs.72,000 a year ago....
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