Indian aviation has had a difficult year. The escalation of the West Asia conflict in February sent jet fuel prices soaring and disrupted some international airspace, leading airlines to cut flights and weighing on domestic passenger traffic. For Cleartrip, which still derives nearly 80% of its revenue from air travel, the response is diversification. Its latest bet is holiday packages, a market still dominated by local tour operators. Gaurav Patwari, Chief Business Officer – Air, spoke to Anees Hussain about the slowdown and the margin opportunity in holidays. Excerpts:
The industry has faced headwinds this year. What has been the impact?
Overall flown passengers, domestic and international combined, are largely flat year on year. Domestic capacity has been cut significantly over the last two to three months; we are at or below about 400,000 daily domestic passengers, a level last seen around 2019. But this is transitory. With 1,500-plus aircraft lined up for delivery, there may be 1-2 quarters more of pain, then things will stabilise. The silver lining is that there will be massive pent-up demand.
Is this a demand problem?
There is no problem on the demand side. It is a supply-side issue. Airlines have cut capacity because of input-cost pressures, and average fares have spiked for both domestic and international travel.
Which international markets are holding up?
Southeast Asia, Europe, Japan and Sri Lanka have done very well this year. The disruption in the Middle East has definitely hurt India’s outbound travel overall.
Have take rates come under pressure?
For the industry as a whole, take rates are largely flat. Individual OTAs have worked on margin expansion, but by and large, nothing much has changed.
Flights still account for about 80% of your revenue. How is the mix changing?
We want hotels, buses and trains to account for 30–35% of our business by the end of FY27, up from 20–22% now. Hotels are leading the diversification: the segment has grown more than 50% over the past year, and room nights have doubled. We now offer more than 500,000 international hotels. This year we also launched bus and train, and we are scaling both. Over the next 2-3 years, you will see a significant proportion of our top line coming from non-air.
What is the margin case for holiday packages?
Air as a single line of business is more of a commodity. India is a highly low-cost-carrier-dominated market, and very competitive. Hotels are becoming competitive too, though they still have a decent margin. Holidays is a niche business where you can build pricing power, through your contracts with DMC partners, advance inventory from airlines and blocked hotels. Once you scale and get operating leverage, margins in holidays can grow much faster than in air or hotels.
How big can the business get for Cleartrip?
Over the next 12 months, we expect holidays to account for a mid-single-digit to high-single-digit share of our overall business.
What exactly does a Cleartrip holiday package offer?
It is an expert-curated itinerary with a traveller-controlled experience. Flights, hotels, activities and transfers come together in one itinerary, and you can change any of them — pick a different hotel, add or drop activities, or change flights. The cost changes accordingly. Visa, ground handling and insurance are also bundled. The itineraries are assembled with AI and then checked by experts.
On the supply side, it is not a marketplace where anyone can register. We have done the selection ourselves. We know the top agencies and ground-handling partners in each destination — those with a quality-first approach and a proven track record.
Most OTAs already sell holidays. What is your edge?
Beyond the product, it is distribution. We are launching holidays on Flipkart as well. India’s next 50–70 airports will come up in smaller towns, where Flipkart already has wide distribution and consumers already trust the app.
What else is coming?
On October 1, we will launch fixed departures. These are smart, bundled itineraries with value-driven hotel blocks and airline tie-ups, and will be about 30–40% cheaper than a normal DIY itinerary.
What ticket sizes are you looking at?
Broadly, a domestic tour in India costs Rs 50,000 to Rs 1 lakh, and an international tour costs Rs 1 lakh to Rs 3 lakh. Premium packages to Europe or Australia can cost beyond Rs 5–7 lakh.
How far is Cleartrip from profitability?
Cleartrip was acquired by Flipkart in a distressed sale during Covid, and scaling up such an asset takes time. That gestation period is over. We have been constantly improving unit economics, and we are very close to profitability, not very far.