Getting Ready To Soar

A notable upsurge in domestic air travel is proving to be a win-win for all stakeholders. Speaking to BW Businessworld, Minister for Civil Aviation Jyotiraditya Scindia described the current transformation of the Indian civil aviation industry as nothing short of revolutionary, highlighting its simultaneous expansion and progress. 

Scindia provided some compelling data points as a proff of this. “We’ve effectively doubled the number of airports, increasing from 74 in 2014 to the current 149, encompassing airports, waterdromes, and heliports. Moreover, daily domestic passenger numbers have not only rebounded beyond pre-pandemic levels but are also on the brink of reaching 500,000 passengers per day. Nearly all airlines are now achieving higher passenger load factors, consistently in the upper 90s, a significant improvement over to the pre-Covid average when it stood in the 80s.”

These impressive statistics are also reflected in the financial performance of the leading domestic carrier, IndiGo. InterGlobe Aviation, the operator of leading low-cost airline IndiGo, reported a substantial profit of Rs 188.9 crore for the quarter ending in September 2023, a remarkable turnaround from a net loss of Rs 1,583.33 crore during the same period the previous year.

IndiGo’s revenue from operations saw a notable 19.5 per cent increase, reaching Rs 14,943 crore in the current year, compared to Rs 12,497 crore in the corresponding period the year ago. This surge in revenue can be attributed to the robust resurgence in domestic travel, which has persisted for the last three quarters. In the quarter ended in September 2023, IndiGo effectively transported 234.09 lakh passengers, solidifying its market dominance with a commanding share of 60.7 per cent. In contrast, during the same period in the previous year, IndiGo had carried 175.16 lakh passengers, holding a market share of 58 per cent.

“We continued to augment our network both domestically and internationally as we added 10 new destinations in the past few months, taking the total number of destinations to 115 as of today,” IndiGo CEO Pieter Elbers said. For the quarter, the company said its passenger ticket revenues stood at Rs 13,069 crore increasing 17.6 per cent YoY and ancillary revenues at Rs 155.1 crore was up 20.5 per cent compared to the same period last year.

Pieter Elbers, CEO, IndiGo talks about the airlines growth strategy, aircraft orders, challenges and much more:

On maintaining leadership amidst a dynamic landscape

– IndiGo’s growth strategy is enabled by delivering an affordable, efficient, and convenient product to a continuously increasing number of customers. To do so, we must stay focused on viability, which, in turn, is enabled by a permanently ongoing improvement in our unit costs. Our outstanding fleet order of nearly 1,000 aircraft enables us to add capacity at very competitive prices for a long period of time. Our constant effort is to lower our costs and provide affordable, on-time, hassle-free travel experience to our customers.

On current order book supporting and expanding IndiGo

– Our current fleet exceeds 330 aircraft, and we have an outstanding aircraft order for nearly 1,000 aircraft which are being delivered between now and the middle of next decade. The latest record aircraft order (of 500 planes) deliveries start only in 2030 and continue well into the next decade. This gives us plenty of time to evaluate all options for the right fleet mix to support the network’s requirements at that stage. In addition, the A321 XLRs are currently expected in 2024-2025. The induction of these aircraft will allow us to capture nonstop international traffic which is now only served through one-stop competing hubs.

On taking proactive measures to mitigate risks and ensure sustainability and resilience

– While aviation has always been a challenging sector to consistently generate profits, largely due to external factors that impact the business, the ability to be agile in such an environment is what differentiates one airline from another. IndiGo maintains strong control over internal operations, executing over 1,900 departures flawlessly. What matters most is being efficient. Aircraft should be fuel and fleet efficient. Pilots are trained to operate the flight in a fuel-efficient manner. IndiGo is also trying to reduce the weight on the flight.

Game of Numbers

As per data released by credit rating agenc ICRA, domestic air passenger traffic is set to grow 8-13 per cent in the current fiscal year, signifying a robust rebound in the sector. Also, some of the recent developments, like entry of new players, large aircraft orders placed by airlines etc., indicate colossal growth in the near to mid-term.

The passenger data for August released by the Directorate General of Civil Aviation (DGCA), the aviation regulator, revealed positive figures for Vistara, which saw its ranking improve to second position overall in the domestic market. The airline had a market share of 9.8 per cent in August, up from 8.4 per cent in July. India’s domestic air traffic in September rose 18.3 per cent compared to the same month last year. Domestic airlines carried approximately 1.23 crore passengers last month, as per DGCA data. IndiGo’s marketshare for September stood at 63.4 per cent. Vistara overtook Air India to become the second-largest domestic carrier in September and garnered a market share of 10 per cent, while flying 12.29 lakh passengers during the period. Vistara has gained market share in the last three months.

What is Vistara doing for this? “Our network strategy was focused on densifying our domestic network while expanding our international footprint across continents in a measured way. Within a short span of close to nine years, we have expanded our network in India and key global markets. Today we operate over 300 flights every day, on more than 50 domestic routes connecting 32 destinations in India and 20-plus routes across 16 international destinations. Currently, we have deployed approximately 35 per cent of our capacity on international routes, which we plan to grow in the coming months,” says Vinod Kannan, CEO, Vistara.

While operators like Air India, owned by the Tata Group, IndiGo, and Vistara (also under the Tata stable) are doing well, others may be struggling in the same market. These include SpiceJet, which has seen its market share decline. Then there are Air Asia and Akasa that are facing some headwinds. GoFirst is still grounded while Jet Airways’ future remains uncertain.

On the flip side, IndiGo in June made a historic purchase agreement with Airbus, ordering 500 aircraft of A320 family. Air India also plans to expand its fleet substantially with orders for 470 aircraft from Airbus and Boeing, as part of its $70 billion expansion programme announced in February.

Push By The Government

Meanwhile, sensing a big opportunity for India on the global aviation map, the central government has left no stones unturned to grow and expand the aviation infrastructure. says Scindia: “As government we have adopted a three-pronged strategy of creating capacities, removing bottlenecks and simplifying processes, which has helped the sector to leap from 74 airports to 149 airports in the past nine years.” Out of the targeted capital outlay of more than Rs 98,000 crore in the airport sector across India, more than Rs 25,000 crore capital expenditure is being incurred by AAI and the remaining by private airport operators/developers, Scindia adds.

India’s aerospace and manufacturing industry is also buzzing with activities. “The first chapter has already been written with the launch of the C-295 aircraft facility by Airbus-Tata. For a nation that was for years labelled as a ‘defence importer’, I think this is a major stride towards achieving the goal of self-reliance in the domestic defence and aviation manufacturing ecosystem,” says Scindia.

Echoes Salil Gupte, President, Boeing India, “Boeing proudly supports the Aatmanirbhar Bharat initiatives as a central pillar of our long-term business strategy in India. We lead among foreign OEMs, with over $1 billion in annual manufacturing and services sourced from 300-plus Indian supplier partners. Notably, 25 per cent of these partners are MSMEs, integral to our global supply chain.”

Boeing Saga

Boeing has a substantial presence in both the commercial and defence aviation sectors. Asked how Boeing balances these two aspects of its business in India, and the opportunities that Boeing sees in the defence segment, Gupte, while calling the two business aspects as being critical to Boeing’s strategy in India, says, “We recognise the diverse opportunities in India’s growing aviation market. In the commercial sector, we’ve established strong partnerships with airlines, delivering a wide range of aircraft and services to enhance air travel experiences. In the defence sector, we collaborate with the Indian government and the Indian armed forces to provide advanced technology and solutions, reinforcing national security.” India presently operates a diverse range of Boeing platforms, including 11 C-17s, 22 AH-64 Apaches (with six more on order), 15 CH-47 Chinooks, 12 P-8Is, 3 VVIP aircraft (737 airframe), and two Head of State aircraft (777 airframe), solidifying India as one of Boeing’s primary defence markets.

The Boeing–India relationship boasts several noteworthy milestones. India is not just the first international customer of P-8 aircraft and the largest international operator of C-17s outside the US, there has also been a pioneering integration of a US weapon on an Indian fighter with the Harpoon.

“Boeing’s commitment extends beyond equipment and services, and through the Boeing India Repair Development and Sustainment (BIRDS) programme, we have collaborated with customers and local industry to establish maintenance, repair and overhaul (MRO) facilities in the region. This aligns with India’s aspiration to emerge as an MRO hub for the region,” says Gupte.