Is India’s aviation market headed for a duopoly?

Will this change Indian aviation?

The total number of aircraft ordered by IndiGo, India’s largest airline, has risen to 1,330 after the latest deal. This is nearly double the size of the current aviation market—India has about 700 operational aircraft. Such a large order reinforces the growth story of the Indian aviation market, which has seen demand skyrocket since the end of the pandemic. With more capacity, the sector is expected to witness higher connectivity, both on domestic and international routes. In the global market, specifically, the latest order is likely to result in more direct connectivity across Europe and South Asia.

What’s the current pecking order like?

IndiGo has a 61.4% market share, according to the latest data from the Directorate General of Civil Aviation. The combined share of all airlines under the Air India umbrella— Air India, Vistara, AirAsia India and Air India Express—stands at 26.3%. So, the combined share of the two airlines is nearly 88%. These two companies are aggressively increasing their capacity from the current fleet strength of 312 for IndiGo and 238 for the Air India group. All these numbers point to a duopoly, say industry experts. Other airlines either lack a strong promoter group or do not have the means to scale up their fleet size.

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What will happen to air fares?

Air fares in India are unregulated. Currently, engine and aircraft delivery have been hit by supply chain issues. In addition, the temporary suspension of operations by Go First has cut the number of flights by 150-200 a day. This has resulted in higher air fares. As airlines increase capacity, the fares could stabilize—but only in the long run.

Are airlines done with ordering for now?

No. Aviation consultancy CAPA India said in February Indian airlines are likely to order around 1,500-1,700 planes over the next two years. Since February, Air India and IndiGo have ordered 970 aircraft. New orders are expected from India’s youngest, Akasa Air, this year. Air India has another 370 aircraft as options that it can convert to firm orders later. As older aircraft retire, they are replaced by new ones. Hence, experts predict airlines backed by strong promoters will order more, given the high demand potential.

Why are airlines bullish on India?

India is one of the fastest growing major economies, with a rising middle class, but has an under-penetrated aviation market. It is also building new airports, which will fuel demand. Airlines are encouraged they carried 13.2 million passengers in May, surpassing the pre-covid record of 13.02 million in December 2019. In fact, average daily flyers in January and February, considered lean travel months, have also been higher in 2023 than seen in the peak months of October and November 2022.

Updated: 21 Jun 2023, 11:53 PM IST