With India’s largest airline IndiGo entering the long-haul segment, industry experts see it as a step towards the country becoming a global aviation hub as growing prosperity fuels an air travel boom in the world’s fifth-largest economy.
A firm order for 30 Airbus wide-body aircraft by IndiGo along with purchase rights for another 70, coupled with Air India’s 70 wide-body aircraft order in 2023, could provide a distinct competitive edge to Indian airlines against foreign carriers, experts added.
“Assuming that the carriers get the right mix of what Indians want, both the carriers have a better chance of succeeding as compared to western carriers by proving courteous service, Indian food and service. In the last few years, there has been a lot of growth in travel for visiting family and friends by senior citizens who prefer service with knowledge of local language and transit at Indian airports,” Ameya Joshi, founder of aviation research platform Network Thoughts said.
According to India’s aviation regulator Directorate General of Civil Aviation, foreign carriers accounted for a 56% share of the 54.4 million international passenger traffic to and from India in FY23, with the remainder held by and Indian carriers. Earlier, the ratio was more skewed in favour of foreign carriers. In FY20, their respective share was 62.4% and 37.6%. During April-December of FY24, domestic carriers have garnered 44.3% share of international traffic from India.
“The development augurs well for the industry as these (long-haul) routes are comparatively more profitable and open up avenues for innovative combinations as Indian carriers have good domestic connectivity as well. This will also help India strengthen its case for creating an aviation hub in one of the major airports,” Jagannarayan Padmanabhan, senior director & global head, transport, mobility and logistics – consulting, Crisil Market Intelligence and Analytics, said.
India is projected to be the world’s third-largest economy by 2027, needing hundreds of aircraft and scores of airports as millions of new passengers take to the skies.
Established in 2006, IndiGo started its international service in September 2011. It has seen a near four-fold jump in its international air traffic in eight years. From 400,953 passengers in October-December of 2015, it carried 3.1 million passengers in the same quarter of 2023.
The government sold the loss-making Air India and its subsidiary Air India Express to the Tata Group in January 2022. The Air India Group, formed by the two airlines, is the largest international operator, as per latest data, holding a 19.9% share in October-December global air traffic to and from India, followed by IndiGo at 18.2%. The two aviation groups control nearly 86% of the international air traffic handled by Indian carriers.
Shakti Lumba, a former head of operations at IndiGo and Alliance Air, expects a pure, full-service offering by Air India, and an ultra long-haul, low-cost facilities by IndiGo.
“Both cater to different market segments. However, IndiGo will reduce the cost of foreign travel tremendously,” Lumba said, adding that this could impact the profitability of Air India on the long-haul routes on account of a competitive fare environment.
The latest development is also in line with the National Aviation Hub policy, which is in the pipeline. Mint had reported in December that the civil aviation ministry is working on the draft of an aviation hub policy along with stakeholders, which will encourage Indian airlines to launch more non-stop flights to faraway destinations and push domestic airports to develop infrastructure for a hassle-free transit for international flights.
In order to set up such hubs, Indian airports need to transform themselves in order to provide an efficient mechanism for security checks, immigration etc as the present route patterns are not the typical hub-and-spoke model, Lumba said. However, he added that India will need ideally 3-4 aviation hubs.
Under the draft national aviation hub policy, the government is also assessing the possibility of dedicated terminals—one terminal exclusively for one airline—for large Indian airlines to ensure economies of scale. This would provide seamless transit to passengers of large airlines like, say, an IndiGo or an Air India, whose international travellers could then avail of domestic flights from the same terminal and vice-versa.
“India will have multiple hubs with Delhi, Mumbai and Bengaluru leading the charge,” Joshi of Network Thoughts said.
While the international traffic to and from India has grown at around 6.8% a year during 2010-2020, almost half the rate of domestic air traffic of 13.5%, aviation research firm CAPA India expects the international segment to grow at around 12% over 2024-2030, almost at the same rate as that for domestic at 13.4%.
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