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India Emerging As Important Aviation Market With Increasing Air Passenger Traffic: IATA

Data from International Air Transport Association (IATA) reveals that India is becoming a major global aviaiton market with an ever-increasing demand for air transportation.

India Emerging As Important Aviation Market With Increasing Air Passenger Traffic: IATA Image for representation

India is fast emerging as a key global aviation market, according to the latest market analysis report of the International Air Transport Association (IATA). India`s domestic air travel has continued to grow robustly and as of February, it was a mere 2.2 per cent shy of reaching pre-pandemic levels measured by passenger revenue kilometres (PRK). The India domestic passenger market also led the rest of the domestic markets in the passenger load factor (PLF) metric in the report which includes the US, China and Japanese domestic markets. It has been the top domestic market measured by PLF for the last four months achieving PLFs of 81.6 per cent in February, 85.2 per cent in January, 88.9 per cent in December 2022, and 87.9 per cent in November 2022.

Globally, traffic is now at 84.9 per cent of February 2019 levels. Total traffic in February 2023, based on RPKs, rose 55.5 per cent compared to February 2022. The report added, "Asia-Pacific airlines had a 378.7 per cent increase in February 2023 traffic compared to February 2022, maintaining the very positive momentum of the past few months since the lifting of travel restrictions in the region. Capacity rose 176.4 per cent and the load factor increased 34.9 percentage points to 82.5 per cent, the second highest among the regions."

Domestic air passenger traffic for all markets measured for February rose 25.2 per cent compared to one year ago. Total February 2023 domestic traffic was at 97.2 per cent of the February 2019 level. At the moment, it is estimated that only about 35 to 40 million Indians travel by air every year. Although World Bank data shows that pre-COVID India had about 168 million air transport passengers, many are repeat flyers. This is much lower than China, which has a similar population and has 660 million air transport passengers during the same period in 2019.

Chinese airlines also have about five times as many planes. With a rapidly growing middle class and rising incomes, together with the right encouragement including lower airfares, many, including airline companies, are expecting India to become the fastest-growing aviation market for years to come. Swiss airline intelligence provider, ch-aviation reported in March this year that French Finance Minister Bruno Le Maire said that IndiGo Airlines could announce an order for "several hundred" Airbus aircraft at the Paris Air Show to be held at Paris Le Bourget Airport in June.

IndiGo, the largest airline in India has over 300 aircraft and currently provides over 35 per cent of all the available seat kilometres on flights in and out of India`s airports. Measured by flight frequencies, IndiGo provides almost 48 per cent of all flights across India`s international and domestic markets.

Just in February, competitor Air India announced a world record order of 470 aircraft - 250 planes from European manufacturer Airbus and 220 from its US rival Boeing. The deal beats a 2017 order by IndiGo for 420 planes, and an order by American Airlines for 460 planes in 2011.

Also read - With Air India's Massive 470 Aircraft Deal; Indian Airlines Have 1,100 Planes on Order

Besides aircraft manufacturers, foreign Airlines are also eyeing the Indian aviation market. Singapore Airlines is one of them. Following the takeover of Air India by Tata Sons, it announced a USD267 million investment into the revamped airline giving it a 25.1 per cent stake in the new Air India group. This adds to the money it has already put into Vistara Airlines which is to be merged with Air India.

SIA released a statement during the announcement which said, "The merged entity will be four to five times larger in scale compared to Vistara, with a strong presence in all key airline segments in India. The proposed merger will bolster SIA`s presence in India, strengthen its multi-hub strategy, and allow it to continue participating directly in this large and fast-growing aviation market."

Etihad Airways under new CEO Antonoaldo Neves is another airline that is planning to expand its presence in the India aviation market. In an interview with Reuters published on April 27, the former CEO of TAP Air Portugal said that: "Etihad has India as a priority." He added that the country is among its top three markets but declined to name the other two. Etihad, which flies to places like Delhi and Mumbai, has identified six other Indian cities it does not serve but wants to launch flights to, he said. He also announced plans for Etihad to double its fleet to 150 planes and triple its passenger number to 30 million annually by the end of the decade.

The expansion plans of the Middle Eastern airline will focus on medium and long-haul destinations, and the airline will avoid operating ultra-long-haul flights, where it can be tough to make money. Neves explained that the goal will be connecting places like China, Southeast Asia, India, and Gulf countries, with Europe and the East Coast of the United States. Neves said that he expects Etihad`s growth to be organic relying on more code sharing and interline agreements. It will not look at mergers or equity partnerships as it had done in the past. It once had a stake in the now-defunct Jet Airways. Abu Dhabi`s sovereign wealth fund ADQ took full control of Etihad last October and appointed Neves who had previously led a turnaround at Portugal`s TAP.

Whereas in the past, Etihad was seemingly willing to grow at any cost, this is set to change. Neves emphasises that growth will only be possible with profitability, especially as the airline is now owned by ADQ. As he explained, "Our mandate is very clear, we don`t fly to places where we don`t make money."

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