by Rise of Domestic Aviation in India
The growth of domestic aviation has been one of the major success stories of the Indian economy in the last two decades. With scores of new airports, low cost carriers and increasing demand, air travel within India is no longer a luxury and has become affordable for the common man. Let us analyze some of the key factors that have contributed to this rise.
Democratization of Air Travel
The introduction of low cost carriers like IndiGo, GoAir, SpiceJet etc. in the mid 2000s changed the aviation landscape in India forever. By offering low fares and point-to-point travel, these carriers made flying accessible to the masses. No longer did people have to depend only on full service carriers for air travel. Low fares helped air travel penetrate even small cities and towns. IndiGo alone ferries around 1.5 lakh passengers daily on its domestic routes. This democratization has been the single biggest driver of growth.
Infrastructure Development
To support the growth in passenger traffic, the government and private sector ramped up aviation infrastructure across the country. Over 200 new airports came up, both greenfield and existing airports were expanded. Major airports in New Delhi, Mumbai, Bengaluru underwent capacity enhancement. Under the UDAN scheme, over 400 new routes connecting small towns have been added. This infrastructure push and connectivity to remote areas has helped aviation penetrate deeper into the country.
Economic Liberalization
When India opened up its economy in the early 1990s, aviation was amongst the sectors that was opened to private players. Till then, Indian Airlines had a quasi-monopoly over domestic routes. New players like Jet Airways, Air Sahara (now Jet Lite), Damania etc. entered the market increasing competition. The rise of low cost carriers later dealt a body blow to the monopoly. Liberalization brought efficiency and choice, keeping fares competitive to common man’s advantage.
Rise of Middle Class
With India’s rising economy, a burgeoning middle class has emerged over the last two decades. Number of people traveling for work or leisure has grown significantly. Discretionary spends on items like air travel have risen. This new middle class is technology savvy and price sensitive. Carriers have tapped into this emerging demography well with their product and pricing strategies helping boost demand.
Changing Lifestyles
Urbanization and westernization have altered lifestyles in India. People are increasingly traveling for short leisure trips rather than just long family vacations. The introduction of ‘visiting friends and relatives’ (VFR) travel has boosted short haul traffic within 6-8 hour flights. Nuclear families have also encouraged Solo travelers who are happy flying on low cost carriers. These demographic and socio-economic changes have all created a hugely favorable demand environment.
Government Support and Policy Initiatives
The government has recognized aviation as a means to drive connectivity and tourism. It has supported the sector through liberal policies, tax breaks, infrastructure spending and initiatives like Regional Connectivity Scheme (RCS)-UDAN. UDAN scheme in particular has been instrumental in expanding aviation map into smaller cities. The Production Linked Incentive (PLI) scheme also recently approved for drones and aircraft components will aid domestic manufacturing growth.
Slowing international traffic in the initial months of the pandemic encouraged more Indians to fly domestically as it was perceived safer than international travel then. This provided a temporary boost which helped carriers recover faster amidst the disruption.
Road Ahead
India is projected to become the third largest aviation market globally by 2024. Domestic aviation is forecast to maintain a growth rate of over 10% in the coming years on the back of rising incomes, tier 2/3 city connectivity and promotional fares on new routes. While high ATF prices remain a challenge, the Indian carriers are well positioned for sustainable long term growth riding on the structural tailwinds discussed above. The future indeed looks bright for our domestic aviation industry.
Domestic aviation has witnessed a paradigm shift in India driven by low costs, infrastructure growth, policy support and rising incomes. It has grown from being an elitist mode of transport to becoming affordable and accessible for common citizens. If the momentum continues, many more people will experience the joy and convenience of air travel in India in the coming years.
Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
