What's Fuelling Growth Of Indian Aviation's International Ambitions? In April 2024, India's international airline capacity reached 7.3 million seats, an increase of 17 per cent from the 6.2 million seats scheduled in the same month in 2019. This change can be attributed to a noticeable shift in spending patterns that emerged after the pandemic, as evident in the increasing inclination of Indians towards international leisure travel

Indian carriers are set to strengthen their rising share in international traffic, a segment more profitable than the domestic sector. The growth would be fuelled by additional aircraft orders and consolidation of new routes in the international segment. In April 2024, India's international airline capacity reached 7.3 million seats, an increase of 17 per cent from the 6.2 million seats scheduled in the same month in 2019. This growth highlights the strength of India's aviation recovery post-pandemic, said OAG, an aviation market analysis firm, in its report. In the last decade, India's international capacity has grown on average by 4.5 per cent each year from a base of 4.7 million seats in April 2014.

India's top international markets

Through the time, the Middle East region's dominance of India's international capacity has been consistent, the report added. In April 2014 the Middle East accounted for 48 per cent of India's international capacity, in April 2024 it increased to 50 per cent, reason? There has been significant Indian migration to the Middle East, an estimated 3.6 million Indians are now based in the UAE, with a further 2.6 million in Saudi Arabia. This demographic contributes significantly to the market, as levels of traffic visiting friends and relatives back in India will always form an important aspect.

India's top international markets based on capacity are UAE, Singapore, Saudi Arabia, Thailand, Qatar. Besides, in the past 15 months, Indian airlines have added 55 new international routes. These include direct flights originating from additional cities to popular long-haul destinations in the United States, Europe and Australia. Indian airlines are also aiming to deploy additional aircraft on the short- and medium-haul international routes, leveraging codeshare agreements with major global airlines and are investing in widebody and long-range narrowbody aircraft for network expansion, adding new international routes and introducing long-haul non-stop flights to key destinations. Indian airlines have certain natural advantages in cornering a larger share of the country's international traffic compared with foreign airlines as they have superior domestic connectivity than their overseas counterparts. "Aided by the planned fleet addition and network expansion strategy, Indian airlines could log a CAGR of 14-15 per cent in the international segment over the next four fiscals, taking their market share to 50 per cent," said Ankit Kedia, director, CRISIL Ratings.

Ambitious expansions of Indian airlines

The share of Indian airlines in international passenger traffic originating from, terminating in, or transitioning through India is surging to 50 per cent by fiscal 2028 from 43 per cent in fiscal 2024, CRISIL stated.

IndiGo, India's homegrown low-cost carrier (LCC), has largest domestic share with 61 per cent seats, whilst internationally it has 17 per cent of the market (in capacity terms) and are second to Air India who operate 24 per cent of capacity - when we include Air India, Air India Express and Vistara. Both IndiGo and Air India have very significant aircraft orders – and IndiGo cemented their international expansion plans with the announcement in mid-April 2024 of a widebody order of 30 A350-900 aircraft. The aircraft will be powered by Rolls Royce's Trent XWB engine. The mission capability of this aircraft coupled with the efficiency of the Trent XWB engine will offer IndiGo unprecedented optionality. Recently, IndiGo has added Bali in its iportfolio as it aims to double in size by 2030 with new domestic and international routes. The country's largest airline is also betting big on A321 XLR aircraft that are expected to be part of its fleet somewhere in 2025.

Similarly, Air India is in a period of transition after TATA successfully won the tender to acquire 100 per cent equity of Air India and Air India Express. Subsequently, Vistara (TATA/Singapore Airlines owned) and Air India are to be merged by 2024 (following regulatory approval). As part of its progress, the airline took delivery of its first A350 aircraft deployed on the busy Delhi-Dubai route. With wide body aircraft to be delivered as part of a total order book, the airline will be poised to expand its international network in the future and improve long-haul offering with A350-900/1000 variants. Last year, Air India commenced flights on new routes such as Bengaluru-Singapore, Kochi-Doha, Kolkata-Bangkok, and Mumbai-Melbourne. The airline will be flying to Ho Chi Minh City and Zurich soon and has enhanced operations in Copenhagen, Milan and Amsterdam.

India's youngest airline, Akasa Air, added wings to its international flying ambitions as the new Indian airline welcomed two Boeing 737 MAX 8 aircraft to its growing fleet. The airline has recently added Jeddah as the second international destination to its network. Starting 15th July 2024, Akasa Air will operate daily direct flights connecting Jeddah with Mumbai and will further enhance this connectivity to operate 12 direct flights a week effective 21st July 2024. Previously, in March the airline commenced non-stop flights from Mumbai to Doha.

Although Indian carriers are upping the ante, however, internationally other carriers dominate providing more than half of the India's international capacity, "The ratio of when we look at this by Indian domiciled carriers versus overseas-based carriers, the split is clear, 66 per cent of seats are still operated by foreign carriers," quoted OAG in its report.

Air India and Emirates are the first and third largest carriers for international capacity in April 2024

Shifting dynamics of travellers

India's international passenger traffic grew to around 70 million in fiscal 2024, from a low of 10 million in pandemic-hit fiscal 2021, to surpass the pre-pandemic level. According to the aviation analysis firm, In 2023, Indian international airline traffic stood at 64.6 million passengers, only 600,000 passengers below 2019 levels. From a demand perspective, this highlights that the Indian international market is close to fully recovered post-pandemic. Notably though, while the traffic volumes in 2023 and 2019 are within 600,000 passengers of each other, the nature of the traffic has changed with more passengers traveling on non-stop services rather than making one or more stops at a hub airport. As many as 37.2million passengers made a non-stop trip in 2023, whereas indirect passengers dropped by 2.5 million to 27.4 million in the same time period. This indicates passengers traveling directly increased from 54 per cent to 57 per cent.

This change can be attributed to a noticeable shift in spending patterns that emerged after the pandemic, as 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. Whilst the Indian middle class is reportedly growing, and GDP per capita is increasing – up from $1,500 in 2014 – the pace of growth in Indian aviation will continue to be linked to the Indian economy as it transitions from a developing country. With projections that India's GDP will continue to grow at between 6.5 – 7 per cent each year for the rest of this decade, the future looks promising.

International passenger traffic is likely to clock a CAGR of 10-11 per cent over the next four fiscals, noted CRISIL in its report.