Growing incrementally Airline Industry in India

Growing incrementally from 2013 to 2019, the number of passengers folded to almost half the previous year's number in 2020.The air travel demography is growing, but so are the operational costs in the industry - aviation fuel, GST and lease taxes, customs, and airports. 6.2 million jobs and around 1.5% of our GDP stand on the shoulders of our air transport sector. Yet, only 4% of the Indian population has taken a flight. So the room for growth is enormous. The scene is action-packed. Indigo controls 51.3% of the market share, while TATA holds 26.6% across four airlines. Air India, Air India Express, Vistara, and AirAsia India - each of them have a distinct brand profile.

The rest of the market is controlled by SpiceJet and Go First. Air India's performance after its acquisition by TATA took off strong when it registered 90 percent On-Time performance in March 2022 compared to below 68 percent in November 2021. In the coming years, the operators will be competing on many fronts : Slots on metro routes Aircraft-to-destination ratio On-time performance Sales and leaseback profits Cost optimization The father of Indian low-cost aviation, Air Deccan Founder G.R. Gopinath, believes India can easily sustain 30-40 airlines. He also advocates reforms and incentives to boost the industry.

Though a slight relief has crept in the past months for fuel prices, the index had hiked almost double that of the previous year's. Airline operators are requesting the government to bring fuel under the GST for the softer taxation policies. The passenger ticket rates are already on a hike between 27 to 50 percent on domestic travel. With Pradhan Air Express securing the NOC for cargo operations in India, the cargo segment is also on the growth path. The parliamentary standing committee's recommendation for standardizing the process and handling charges at the airport is expected to bring professionalism and affordability to air cargo logistics.  The cargo volumes were going south even before the pandemic, and covid aggravated the condition on a large scale.

The domestic cargo traffic in 2018 was approximately 7.6 Lakh MT, declining to 7.3 Lakh MT in 2019 and just around 4.68 lakh MT in 2020. The long-term perspective registers a growth of 0.4 percent CAGR from 2011 to 2020 and an expansion of 6.4 percent CAGR from 2010 to 2019. Around 80 percent of the total cargo carried was through belly cargo and only approximately 20 percent on dedicated freight carriers. Ignoring the fact that Indian carriers took only around 20 percent of the total international cargo to India would be a severe mistake. The scope for improvement in the sector is vast.

The airline industry has always faced strategic challenges. Cutthroat competition, high entry levels, and a price-sensitive market have always been the bane of the industry. The current ticket price hike will increase the travel costs but will be able to recover around 60 to 70 percent of the actual hit. Labour issues relating to salaries and payments are huge question-marks on the operators and their operations management. Rupee depreciation coupled with the VUCA world of fuel prices may hurt the industry further. And as in most other sectors, cyberattack threats threaten the third-party cloud servers for aviation software, primarily hosted outside India. The outcome is a VUCA industry ripe with opportunities. A robust strategy coupled with the right culture and technology could be an answer for growth in this industry.