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Indian aviation boom: What will it mean to you when you fly



(CNN) – Just like the railways shaped in modern India, cheap air tickets, driven by a fierce competition between carriers, are changing the way the Indians travel around their country.

They're also promising to take hundreds of millions more to the skies – most of whom have never flown before.

But ironically, the cut-throat competition also means the very same airlines that unleashed this revolution may be among the last to enjoy its fruits.

Case in point: The recent collapse of debt-driven Jet Airways ̵
1; one of India's largest airlines. Despite operating in one of the fastest-growing fast-growing aviation markets on the world, it announced on April 18 that it was suspending all flights after it had run out of cash.

Mega orders fueled by unquenchable demand

 Budget carriers account for 70% of India's domestic aviation market.

Budget carriers now account for 70% of India's domestic aviation market.

MANJUNATH KIRAN / AFP / AFP / Getty Images

To better understand the current paradoxical state of India's aviation industry, we need to go back a few years.

In 2014, a relatively young Indian low-cost airline, IndiGo, made headlines by ordering 250 Airbus A320 aircraft in one go, a purchase worth a whopping $ 26.5 billion at catalog prices.

Coming on the heels of the earlier Order for 100 aircraft of the same type, it was at the time the one largest aircraft order ever received by the European aircraft manufacturer.

While these figures may have looked eye-catching then, demand has caught up in the Indian commercial aviation industry after four years of double-digit growth, and IndiGo is already shifting to larger aircraft.

In late 2018, the carrier announced it was converting 125 aircraft from its A320 to the A321neo type, a larger aircraft that could accommodate 220 passengers instead of the 189 of the A320.

These aircraft mega-orders are not one-offs, but reflect a wider trend.

In July 2016, the budget carrier GoAir doubled the size of an earlier aircraft order of the new Airbus A320neo to 144. Spicejet has ordered 205 of the Boeing's 737 MAX model.

Indian airlines have close to 1,000 outstanding aircraft orders in their books There are currently 700 operating airliners in India.

Two decades of wonder

 India's Spicejet airline is one of several low cost carriers to place large aircraft orders in recent years.

India's Spicejet Airline is one of the few low-cost carriers to place large aircraft orders in recent years.

Bloomberg / Bloomberg / Bloomberg via Getty Images

So what does all this mean for travelers?

Basically, cheap domestic flights and more routes – making it easier than ever to explore India, including destinations once considered too remote for a quick vacation.

The average domestic fare in India now costs less than a third of what it did in 2005.

In, according to the International Air Transport Organization (IATA), budget airlines now account for 70% of the domestic market. The past 20 years, the Indian airline industry as a whole has multiplied the number of passengers it carries by eight.

Performance in the low cost segment has been even more impressive: it has grown 27 fold since its beginnings (the first Indian low cost carrier, the now-gone Air Deccan, launched in 2003).

"India has the lowest air travel penetration rates globally among the top 20 air travel markets," he said. "It is low even compared with other emerging markets," explains Binit Somaia, South Asia director of CAPA, an aviation consultancy.

"If you look at domestic capacity, the number of annual available seats per capita, it is also well below other large economies; if India's about 0.1, similar numbers for China and The US is 0.4 and 2.6 respectively, so there's room for more growth. "

Indeed, IATA expects the number of air travels in India to be more than triple over the next couple of decades, from the current 160 million to 520 million per year in 2037.

"The 8.1 billion train trips per year in India have the potential of getting converted into over 1 billion flying trips."

Anand Stanley, President and Managing Director of Airbus India

Even at their lowest end, IATA's traffic e Stimulating the project that India will become the third largest air travel market in the world (after the United States and China) within a generation.

Looking at the passenger throughput, this may have already happened.

Anand Stanley, president and managing director of Airbus India & South Asia, shares this optimism over the long-term prospects of the Indian air travel market.

"The 8.1 billionth train trips per year in India have the potential of getting converted into over 1 billion flying trips," he says.

"Whether airlines are going to benefit as much as travelers and aircraft makers from

Feeling the pinch

 Vistara flight attendants are on the board of an Airbus A320neo during an event at the Indira Gandhi International Airport in New Delhi on September 1, 2018. </p>
<p> CHANDAN KHANNA / AFP / AFP / Getty Images </p>
</div>
<p><span> Among the major Indian airlines, the Indian Ocean Airlines, Only two, IndiGo and GoAir, have managed to remain consistently profitable in recent years. A third one, SpiceJet has had a more mixed performance, although it seems to be moving in a positive direction. </span></p>
<p><span> However, a few tight quarters in 2018 means that even these budget carriers are not sure if they will return a profit at the end of the current fiscal year. </span></p><div><script async src=

Leaner low cost carriers, though, seem to be coping better with a competitive environment that keeps ticket prices low, and makes it difficult to compensate for increases in costs such as fuel.

In contrast, full-service carriers are feeling the squeeze.

Government-owned Air India has long been a burden on public finances, with bureaucracy and high costs often blamed for its failures.

Jet Airways, a privately owned full-service carrier and India's second largest airline, regularly posted losses over the last one. decade, leading to its collapse this month. A tie-up with Etihad Airways of Abu Dhabi, which bought 24% of its capital, was not enough to pull it out of the red.

It meets the same fate as Kingfisher Airlines, once a revered brand and India's second largest domestic airline. Owned by flamboyant beer magnate Vijay Mallya collapsed in 2012, along with the rest of its owner's business empire.

The sheer size of the Indian aviation market, though, keeps attracting new entrants.

Both Air Asia and Singapore Airlines have established separate joint ventures with Indian industrial conglomerate Tata Sons. The result has been the launch of two new airlines: AirAsia India, which follows the low-cost model of the other carriers in the AirAsia group and Vistara, a full-service carrier with a more upmarket positioning.

Domestic market remains the focus

These newly established airlines have until now been limited to domestic market. This is about to change as airlines reach the minimum Indian fleet size limit set by the Indian government to grant access to international routes.

But it is also relevant that the domestic market is bigger and grow up faster so far.

Airlines has responded by adding a small turboprop aircraft to theirs.

Airlines have been responding by adding a small turboprop aircraft to their Fleet.

But Can India's infrastructure cope with all this growth?

Indian authorities have been busy building new airports to catch up: 34 of them have been inaugurated over the last 18 months as part of an ambitious plan that aims to build 100 new airports over a period of 15 years, 70 of these in greenfield locations

Nevertheless, it's the international market that may be heading for a shakeup.

This is an area where the country's airlines will face a tough competition from the mighty Gulf carriers, which have a key link in India in their global networks.

But according to CAPA's Somaia, Indian low-cost carriers have a great opportunity ahead of them in international markets.

"There is a convergence of several factors: one hand there is an unmet demand, with expanding middle classes aspiring to travel to new places, including many leisure oriented destinations," he says.

"On the other hand, some major foreign carriers are constrained by bilateral treaties and two large full service carriers, and Air India and Jet Airways are focused on sorting out their own internal issues. The potential to grow this market is significant. "

New opportunities for international travel

With the long-range single-spacecraft such as the A321neo becoming available, India's ultra-competitive low-cost airlines are already eyeing new opportunities on the international front.

IndiGo is preparing to launch routes to Europe, China and other destinations in Southeast Asia, while SpiceJet has set its sights in the former Soviet republics as well as Singapore, Malaysia and China. GoAair flew its first international service, to Thailand, last October.

Meanwhile, Vistara and AirAsia India may follow suit as soon as they meet the 20 aircraft fleet threshold required by the Indian regulators before launching international flights.

Even if some of these destinations would need an intermediate stop – for example Central Asia cities Tbilisi and Baku have been touted as stepping stones for IndiGo's planned service to London – Indian low-cost airlines are expecting to capture part of the market by offering rates up to 30% lower than current prices.

If the past is any guide – and carriers are able to replicate their formula overseas – travel to and from India

Good news for travelers, not so much for incumbent airlines.


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