Airlines Industry in India: What’s in store and What’s ahead?
Have you ever wondered how a nation with a billion dreams takes flight toward prosperity? Well, today, welcome aboard our high-flying journey through the dynamic skies of the 'Indian Aviation Sector'!
From the takeoff to the cruising altitude, we'll be delving into the depths of this industry. So, go ahead and fasten your seatbelts, because we're about to embark on this exciting and at times turbulent journey!
Indian Aviation Sector: An Overview
The Indian airline sector is on a trajectory of rapid growth, encompassing scheduled air transport, non-scheduled air transport, and air cargo services. Dominated by domestic air traffic, India accounts for approximately 69% of South Asia's total trips.
Despite the turbulence caused by the COVID-19 pandemic, the industry is showing signs of resilience. Indigo, commanding the largest market share, is a notable player in the field. India is on track to become the world's third-largest air passenger market, surpassing the UK by 2024.
Key drivers of this growth include rising household incomes, the emergence of low-cost carriers, increased FDI inflows, and a growing GDP. To facilitate this growth, both government and private sectors are investing significantly in infrastructure development.
The Indian aviation sector significantly contributes to GDP and job creation. With sound strategies in place, it's poised for further growth in the years to come.
Key Aspects of the Aviation Sector in India
Here is a detailed airline industry analysis-
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Revenue
The Indian aviation sector, although hit hard by the COVID-19 pandemic with substantial financial losses, has displayed resilience and recovery. The future holds promise, with forecasts suggesting India will become the third-largest aviation market in the upcoming period.
Long-term projections are even more optimistic, with the potential for the aviation industry to contribute up to $1 trillion annually to the Indian economy by 2043. This growth is underpinned by a large population, rising income, a robust economy, and substantial investments in infrastructure and technology.
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New Orders
The Indian aviation sector has witnessed substantial changes recently, marked by record-setting aircraft orders from airlines. Air India and IndiGo made historic orders of 470 and 500 planes, respectively, in early 2023, reflecting growing confidence in the industry. Akasa Air and Jet Airways are also planning significant fleet expansions.
Consultancy CAPA India anticipates 1,300 more orders from Indian airlines in the coming years, signaling strong post-COVID-19 recovery. The Indian aviation market is poised for further growth, with expectations of exceeding 1,200 narrowbody aircraft orders, driven by rising demand, low-cost carriers, and government initiatives.
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Net Profit
In the last 2-3 years, a significant reduction in aggregated net losses was expected, thanks to a resurgence in passenger volumes and stable fuel and foreign exchange costs.
The industry is anticipated to return to profitability in the upcoming period, with passenger traffic surpassing pre-pandemic levels and higher pricing.
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Research and Development
Research and development in India's aviation sector have surged up with ongoing trends pointing towards more growth. The country has expanded its airport count from 74 in 2013-2014 to an expected 220 by 2024-2025.
Collaborating with the private sector, the government is investing substantially in infrastructure, aiming to employ a few hundred thousand people over the next decade. Passenger numbers are on the rise as well.
The future holds promise, with significant growth expected in international travel and cargo. Government schemes, like UDAN, have boosted regional connectivity, while technological advancements, such as AI and automation, promise efficiency and cost savings.
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Attrition
Over the past few years, the aviation industry has seen more news about attrition than any other industries.
Airlines like Air India and Indigo have struggled financially, requiring cash infusions. SpiceJet faced safety and financial problems, leading to reduced operations. Infrastructure constraints, regulatory hurdles, a skills gap, high costs, and environmental concerns further challenge the sector.
The future might see continued attrition if these issues persist. However, government initiatives, economic growth, and technological advancements, such as AI and automation, offer opportunities for sectoral growth, potentially mitigating these concerns.
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Summing Up the Synopsis of Aviation Industry in India
The Indian aviation sector is soaring towards a promising future. Key factors driving growth include rising incomes, low-cost carriers, increased investments, and a growing GDP.
The sector's contribution to GDP and job creation is substantial. As India charts its course to becoming the world's third-largest air passenger market, it's clear that the Indian aviation industry has a bright future ahead, with opportunities for further expansion and development on the horizon.
Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.
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Research Analyst - Aakash Baid