Though e-commerce has immense potential, there are many factors that hinder its growth, says Pankaj Narayan Pandit, head - Airlines Vertical, Sonata Software Limited. Excerpts from an interview to Sudhakaran of CyberMedia News:

E-commerce is the in-thing in the new-age economic system, but do you think India is geared up to tap the potential of it?

E-commerce offers unprecedented opportunities for the travel sector in both developing and developed countries. However, it is still in its nascent stage in India. Low Internet and PC penetration, lack of broadband network, security concerns on the use of credit card, low ‘bookers to lookers ratio’ are some of the factors inhibiting the growth of e-commerce in India.

Being the head the Airlines vertical at Sonata Software, how do you look at the possibility of e-commerce in the airline industry?

The dawn of the Internet era has significantly changed the way travelers and airlines around the world interact with each other. GDS channel was earlier the only medium of transferring data. This has now been supplemented by a wider range of IP-based applications termed as e-commerce. The Internet has created a new economic ecosystem, the e-commerce marketplace, and it has become the virtual main street of the world.

Providing a quick and convenient way of exchanging goods and services both regionally and globally, e-commerce has boomed. The travel industry has benefited hugely through the growth surge in e-commerce. According to IDC, online sales of airline tickets, car rentals, and hotel reservations make the travel industry one of the strongest e-commerce markets in existence today.

Airlines were the earliest practitioners of large-scale computerization and e-commerce. In the late nineties, travel websites such as Expedia and Travelocity emerged as the most popular website brands in the Internet travel marketplace. Today the adoption of e-commerce technologies by low-cost airlines to facilitate direct sales has accelerated their market penetration. These airlines are already selling majority of their seats through online channels. On the other hand the network airlines (or mainline airlines) are able to sell less than 15 per cent of their tickets using online channels.

There are many reasons why mainline airlines are not able to tap the full potential of e-commerce, like, complexity of their business model and complexity of fares and also the dependence on traditional travel agents.

As per airline IT trends survey, airlines have sold 49.9 per cent of tickets through GDS channels, 26 per cent through all web channels in 2009. However, this break up is expected to change to 37 per cent and 41 per cent respectively by 2013. To make this happen, airlines have turned to e-commerce, or e-distribution channels, thereby reducing their dependency on GDS/travel agents.