May 17, 2024

Skybound Ascent Navigating the Dynamics of India’s Domestic Aviation Boom

Domestic Aviation Boom in India

With the rapidly growing economy and middle class population, domestic aviation in India is experiencing a boom in recent years. The increased air connectivity between cities has opened new opportunities for travel, tourism and business. Let us analyze some key aspects of this aviation boom.

Growing Air Traffic
Domestic air passenger traffic in India has increased substantially over the last decade. According to data from Airports Authority of India, domestic air passenger traffic has grown from around 50 million passengers in 2010 to over 140 million passengers in 2021. This is a growth rate of around 10% annually over the last 10 years. Low cost carriers such as IndiGo, SpiceJet and Go First have contributed the most to this growth. They have expanded their fleet sizes and connected more cities to enable affordable air travel for masses.

Impact of Low Cost Carriers
The entry and expansion of low cost carriers has been the single biggest factor driving Domestic aviation growth in India. They brought down air fares substantially, sometimes by as much as 50-60% compared to full service carriers. This made air travel affordable for the rapidly growing Indian middle class. Low cost carriers today account for around 80% of the domestic passenger traffic in India. They have enabled a large number of Indians to fly for the first time. This has boosted travel, tourism and business connectivity in the country.

Rising Regional Connectivity
Earlier, air connectivity in India was limited mainly to metro cities. But with growing regional demand, airlines have started flying to many tier 2 and tier 3 cities in recent years. The government’s UDAN regional connectivity scheme has further accelerated this trend by providing viability gap funding to start flights to unserved and underserved airports. According to the civil aviation ministry, over 450 routes have been started under UDAN to connect many remote areas. This is spurring localized economic growth and development across India.

Boost to Travel and Tourism
Increased air connectivity across India has given a major boost to travel and domestic tourism industry. Many destinations which were earlier hard to reach are now easily accessible by air. Online travel agencies have reported robust year on year growth in domestic flight bookings over the last five years. Sectors like hotels, restaurants, transport have also benefited. Various state governments are leveraging increased air connectivity to promote local tourism circuits and products. This is generating jobs and economic activity nationally.

Challenges of High Growth
While domestic aviation boom has been large opportunity, it has also posed some challenges. With air traffic growing at a rapid pace, India’s airspace and airport infrastructure is under severe strain. Problems of congestion, delays and cancellation of flights have increased. Aircraft movement has increased sharply at key metro airports leaving little room for further expansion. This calls for increased airport capacity, modern air traffic management systems and technology upgradation on priority.

Safety aspects also need tight monitoring with the high traffic growth. Recent incidents have highlighted the need for close oversight and enforcement of safety regulations, training and maintenance protocols by DGCA. Financial health of airlines is another concern area as margins are thin. A few airlines collapsed in recent years due to losses. The sector requires continued fiscal and policy support from the government to sustain growth momentum.

High fuel costs are a perpetual challenge. With global crude oil prices being volatile, it affects airline profitability and ability to keep fares low. The massive taxation on ATF in India raises operating costs. Passenger service fee and other airport charges in India are among the highest in the world adding to the cost burden.

Way Forward
Despite challenges, the future of domestic aviation in India remains bright given the country’s rising incomes and aspiration for air travel. The government recognizes its importance and is taking steps like infrastructure upgradation, airspace optimization, MRO incentives to address constraints. Promoting aircraft manufacturing and leasing in India will aid cost reduction and self-reliance. Continued regulatory support coupled with airlines’ efforts to improve fleet utilization and load factors can help sustain strong growth in Indian skies in the coming years. The socio-economic dividends of the aviation boom will accelerate transformation across India.

Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it