Indian airline companies have been a hot topic of discussion lately. According to credit rating agency CRISIL, they are poised to capture nearly 50% of India’s international passenger market in the coming years.
Let’s examine what’s happening in the Indian aviation industry and why Indian airlines are gaining a larger share of international passenger traffic.
What’s Happening?
On May 6, 2024, credit rating agency CRISIL stated that by 2027-28, Indian airlines would handle more than half of the country’s international air traffic.
What’s noteworthy is that this growth isn’t limited to bringing passengers to or from India but also includes travellers going to other countries through India. This figure, which was 43% in the previous fiscal year, is estimated to rise to nearly 50% in the next four years.
Boom in International Traffic
As per the Deccan Herald, international traffic surged to around 7 crore in fiscal 2024, surpassing pre-pandemic levels of 6.7 crore in 2019-20. Notably, international traffic had plummeted by nearly 10 million during the pandemic. This figure indicates a rapid recovery in Indian international traffic.
What’s Driving the Growth?
In the last 15 months, Indian airlines have added 55 new international routes, bringing the total to over 300, thereby enhancing direct connectivity to major international destinations. Additionally, increasing disposal income, easier visa approvals, and the increasing number of airports play a vital role in the growth of international passenger traffic.
What’s in it for Investors?
Surviving in the Indian aviation industry is no small feat, as nine airline companies have shut down since 1996. Currently, many companies, including Air India and SpiceJet, are struggling to turn profitable due to high operational costs.
Moreover, IndiGo, which commands over 62% of the domestic market, has been incurring losses for several years but has gradually improved, reporting profits since Q3 FY23. It remains to be seen whether Indian airlines’ market share in international traffic brings any changes to the situation.
What’s Next?
According to Moneycontrol, Ankit Kedia, Director of CRISIL Ratings, believes that over the next four fiscals, Indian airline companies’ CAGR growth in the international passenger market could be around 14-15% due to expansion strategies.
As per the India Brand Equity Foundation (IBEF), the International Air Transport Association (IATA) predicts that by 2030, India could become the world’s third-largest air passenger market, surpassing China and the United States. Moreover, to meet the increasing demand for travellers, the number of aircraft is continuously increasing, with an estimated 1,100 aircraft in India by 2027.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
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