New Delhi: The dominance of foreign airlines in India’s international traffic will erode significantly over the next few years, with domestic airlines ramping up their international offerings and expected to capture at least half of the international traveller market in the next four years.
This shift is being driven by Indian airlines increasingly cashing in on the post-pandemic spending shift boosting international leisure travel. In order to cater to this growing market, the airlines are adding several new destinations and deploying more aircraft on international routes.
According to data from rating agency Crisil Ratings, the share of Indian airlines in international passenger traffic originating from, terminating in, or transiting through India was around 43 percent in 2023-24, when the country’s international passenger traffic grew to around 70 million passengers.
This share, however, was stagnant at less than 35 percent pre-pandemic, picking up pace now as Indian carriers deploy more aircraft on international routes, boosted by ambition and ability among citizens to travel to foreign destinations.
“The share of Indian airlines, which was rising steadily earlier, picked up pace since the pandemic,” Manish Gupta, senior director and deputy chief ratings officer, crisil ratings, told ThePrint.
Gupta added that this was due to faster international expansion by the Indian airlines as evident from their addition of 49 new international routes during FY24, including long-haul flights. These included direct flights originating from additional cities in India to popular long-haul destinations in the United States, Europe and Australia, effectively reducing flying time and eliminating layovers.
“This led to Indian airlines capturing a larger pie of the growth in international passenger traffic, resulting in their share rising to 43 percent in FY24,” he said.
The share of Indian airlines in international traffic stood at 33 percent in 2015-16 when the passenger traffic was 55 million, growing only marginally in four years to 34 percent in 2019-20 when the international passenger traffic stood at 67 million. However, this pace is expected to pick up, and this share is forecast to increase to 50 percent by 2027-28, when the country’s international passenger traffic is expected to rise to 100-110 million passengers, according to Crisil Ratings.
Suprio Banerjee, vice president & sector head, corporate ratings, ICRA Limited, said that the rise in share of Indian carriers in international traffic has been driven by increasing deployment of aircraft by Indian carriers on international routes and the addition of new foreign destinations, supported by aspiration as well as affordability to fly abroad.
Gupta, too, said there has been a noticeable shift in spending patterns since after the pandemic as is evident in the increasing inclination of Indians towards international leisure travel. “Increasing disposable incomes, easing visa requirements, growing number of airports and enhanced air travel connectivity are boosting international travel,” he said.
He added that the government’s focus on making India a hub for tourism was expected to provide a fillip to inbound traffic. Hence, international passenger traffic is likely to clock a compound annual growth rate of 10-11 percent over the next four fiscal years, against a mere 5 percent CAGR in the four years prior to the pandemic.
Purchasing aircraft, adding destinations
Currently, of the total international passenger traffic handled by Indian carriers, Air India has a majority share. Banerjee said that the airline’s share stood at around 29 percent in FY 2024. According to Air India’s website, it flies to 79 international destinations, including 59 non-stop routes, making it the largest international network in the country.
Domestic market leader IndiGo is also eyeing a larger share of the international market, adding seven new international destinations in the past 18 months. The low-cost carrier now operates to over 30 international destinations. In a step to increase its share in the international traffic, the carrier last month placed orders for 30 Airbus A350-900 aircraft, marking its foray into wide-body aircraft.
The move will help the airline expand its international network to long-haul destinations. The deliveries from this order will start 2027 onwards, and the airline also has purchase rights for an additional 70 Airbus A350 Family aircraft.
Consulting and advisory firm CAPA India termed the deal “very significant”, highlighting the airline’s ambitions to expand its range into new markets. “The airline clearly believes in the massive potential of the Indian market, and the addition of the A350s underlines the fact that it sees the greatest scope for growth in the international arena,” the firm said in an analysis.
It further noted that this order will help shift the balance towards Indian airlines in the international market, which has historically been dominated by overseas-based airlines, particularly on routes longer than six hours.
In a call with analysts, Indigo CEO Peters Elbers also pointed out that India only has around 70 wide-bodied aircraft and its carriers were significantly underrepresented in the non-stop, long-haul international markets.
India’s youngest airline, Akasa Air, too, has announced the addition of Jeddah as its second international destination, after Doha.
“Indian airlines are also aiming to deploy additional aircraft on the short- and medium-haul international routes and leveraging codeshare agreements with major global airlines to offer onward connectivity to passengers,” Crisil Ratings said, adding that Indian airlines have certain natural advantages in cornering a larger share of the country’s international traffic compared to foreign airlines.
It added they have superior domestic connectivity to their overseas counterparts — which serve only select Indian cities — and can offer end-to-end international connectivity on a single ticket to travellers from Tier 2 and Tier 3 cities. Further, India’s geographic location also lends itself well to air connections between the EMEA and Asia Pacific regions, potentially positioning the country as a hub for international travel.
Ankit Kedia, director, Crisil Ratings said, “To capitalise on the growth in international travel, Indian airlines are investing in wide-body and long-range narrow-body aircraft for network expansion, adding new international routes and introducing long-haul non-stop flights to key destinations. Aided by the planned fleet addition and network expansion strategy, Indian airlines could log a CAGR of 14-15 percent in the international segment over the next four fiscals, taking their market share to 50 percent.”
International routes are also more profitable and can help strengthen the financial profiles of Indian airlines.
“For airlines, international routes offer benefits in terms of higher yields, given the long-haul operations, coupled with favourable rates of ATF during refuelling at foreign airports, given the relatively higher taxation on ATF in India. The international operations also aid as a natural hedge to the foreign currency payments for the Indian carriers,” ICRA’s Banerjee said.
Gupta added that Indian airlines were looking to capture a large portion of the growth in international passenger traffic as it was typically more profitable due to higher yields and has less intense competition compared with domestic routes.
Banerjee said, “Therefore, faster CAGR of 14-15 percent in the international operations over the four fiscals to FY28, as against a CAGR of 10-11 percent in the domestic operations during the same period will strengthen the business and financial profiles of Indian airlines.”
(Edited by Tikli Basu)
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