Indian aviation industry booms as airlines invest for long-term opportunities

The Indian aviation industry has significantly expanded over the past few decades. On Monday, low-cost carrier IndiGo broke Air India's record order of 470 aircraft by ordering 500 of the Airbus A320 family aircraft as passenger numbers shot up. These activities showcase bright prospects for the industry badly hammered by the pandemic.

The demand for air travel has been consistently rising, enabling the industry to make up for the capacity lost during the pandemic, says Vinamra Longani, Head of Operations at Sarin and Co. and an aviation expert with over two decades in the industry. “There is a consistent rise in demand for air travel within the domestic market enabling the industry to make up for capacity lost during the pandemic quickly." Longani told Republic.

Domestic air travel in India surpassed pre-covid levels and will continue to expand. Domestic carriers flew 13.2 million passengers in May, as per the Directorate General of Civil Aviation (DGCA) data. The Ministry of Civil Aviation (MoCA) has estimated that India will have more than 140 million passengers in the current financial year.

"Given that we are a bright spot amid the global recession, aircraft manufacturers are looking for markets (like India) to sell their aircraft. Everything is in sync with the India story be it GDP growth or incremental increase in aircraft orders,” Longani said. In the next 20 years, Indian airlines are expected to carry over 1.3 billion people annually, according to the CAPA-Centre for Aviation. In terms of capacity, India has 148 airports and ranks third in the world for domestic travel.

Airlines betting high on India

Regardless of being dubbed the "fastest-growing aviation sector" in the world, airlines have had difficulty surviving in the brutally competitive environment. While travel limitations during Covid-19 severely hurt balance sheets, the financial situation of the carriers was already precarious.

"India is a high-cost, often low-yielding market with profits hard to come by. Despite this, stakeholders continue to invest in the hope of returns in the long run," Longani said. “Airlines are in this for a long haul fully aware they may not be profitable in the short or near term,” he added.

The grounding of numerous airlines in India can be linked to several factors, including financial difficulties, high fuel costs, cutthroat competition, and tight government regulations. It remains to be seen whether any new players would be able to effectively traverse the stormy Indian skies.