Until now, we knew that the future growth of world economy lies in China and Asia. This may be the case for every industry but for the airlines sector it may not be the case. At least, the role of India and China in the future growth of airlines industry seems to be over rated. This idea did not come from me but came from The Boston Consulting Group (BCG). The researchers of BCG reached into this conclusion in the report, "Is the Impact of China and India on Future Long-Haul Travel Exaggerated?"
I am quoting from its website:
"The projected growth of China and India is expected to transform nearly every global industry. However, analysis conducted by The Boston Consulting Group on these countries’ likely impact on long-haul air travel -- from both supply and demand perspectives -- found otherwise. In fact, the outlook for absolute growth in demand shows that Western Europe, Japan, and the United States all have greater growth prospects than China or India. The implications are significant for managers of airlines serving developed economies."
This is shocking, isn't it? We have heard a lot in the recent months how the new markets of India and China would shape up the airlines industry. BCS experts feel that the economies of India and China may be growing fast but still, these two countries are not exactly rich that their people can afford long journey by plane. And GDP per capita of the two countries are still way behind than the developed countries. BCG experts viewed that when GDP per capita reaches about $15,000 then it can influence the long-haul travel significantly. Right now, GDP per capita of China and India are $1,200 and $600 respectively. According to BCG report, there is little possibility that China and India would reach the magical figure of $15,000 GDP per capita before 2030 and 2040 respectively.
So, the message for airlines industry is clear: look no more to east. In fact, the authors of this report feel that airline companies should look towards their own backyard for supply and demand. USA, Europe and Japan are still the best place to look for potential growth in long-haul travel- that is the conclusion of this study. However, this study acknowledges the importance of India and China too. Some cities in these two countries are developing quite fast and airlines industry will surely flourish in these cities. Secondly, neglecting India and China will only limit the earning potential of the airline companies. However, the main point of this study is that there is no reason to get euphoric about India and China as far long-haul travel is concerned.
Well, I am not an expert about the airlines industry but I must admit that I agree with the main conclusion of the report. If you look at India and China, you can easily see that only few cities are wealthy. Airlines industry can never flourish being centered on just 5-10 cities. Secondly, some people are getting too much rich in India and China but most people are still very poor. That is not an ideal thing for the growth of airlines industry either. So, the passionate supporters of India and China may feel frustrated from the report of BCG but I feel that they are right.
What do you think about this matter?
Related Article
It is absolutely true that airlines business can not get the full pace as it needs an oveerall contribution from the people. However, in India and Chian it is not possible due to lack of overall financial growth of the people though the are getting boom in their business and economic sector these days. On the other hand airline companies may have some business policy to cultivate in a hard land.
Thabk you for your good article
Posted by: Biplob Kishore Deb | July 28, 2006 11:16 AM | Permalink to Comment