Vibrant Indian growth saga will propel the global aviation sector
Indian carriers now serve 42.7% of all international routes
image for illustrative purpose
A robust economic growth (IMF forecasts 5.4% growth in FY23 and 6.3% in FY24, among the fastest- growing major economies) and an increasing middle-class population (30% of a population of 1.42bn, as of 2021) present a tremendous growth opportunity, with the need for a good international hub. Drawn towards the fast-growing economy, leading multinational companies have entered India in a big way. They require air connectivity to all corners of the world, enabling trade and globalisation of production and supply chains.
Moreover, with a growing economy, India’s middle-class population has higher disposable incomes and is able to afford air travel (almost 100% of India’s international tourists travel by air vs 54% globally). A recent study by the World Bank estimates India’s share of middle-class population to double to 61% by 2046, while the super-rich households will grow to nine million households over the period. This growing middle-class segment is expected to gain increased access to travel, which is bound to become more affordable; the middle-class segment is expected to double from one in two to two in three Indians by 2047, according to a pan-India survey. In that event, the sheer population size implies that the middle-class population will be 900 million by 2047, almost three times the population of the US, where the middle-class makes up only 50% (around 180 million) and China (163 million), where they make up 13.7%.
Keeping in mind the strong growth prospects, Indian carriers are expected to order an additional 1,000-1,200 aircraft over the next two years to cater to growing demand (source: CAPA). This is over and above the recent order of IndiGo’s 500 planes and Air India's 470 planes plus 70 options from Airbus and Boeing to be procured over the next decade.
Air India’s orders also consist of widebody aircraft (which operate on medium-, long- and ultra-long-haul routes), enabling the Indian carrier to fly to more destinations with attractive pricing points for domestic and southeast Asian passengers flying to Europe and the US.
Indian carriers’ order book is now at the top of the list, accounting for a more-than-6% share of the sector backlog, the second largest only to the US (source: Barclays). However, India’s commercial fleet of around 700 aircraft (one aircraft for every 2m passengers vs 50,000 in mature markets such as the US), although up from 400 in 2013, is still smaller than some of the world's largest individual airlines.
India has also been predicted to overtake Germany to become the world’s third biggest travel and tourism country by the World Travel and Tourism Council’s Economic Impact Research. It was also one of the first markets in Asia to recover from the pandemic, with first domestic tourism taking off and then outbound travel reaching new highs as Indians fanned out across the world, becoming the largest market in destinations such as Singapore and Australia.
India boasts of the largest diaspora, with 32 million NRIs and People of Indian Origin (PIOs) residing outside India (source: Ministry of External Affairs). Additionally, with 2.5 million migrating every year, the country is one of the biggest sources of travellers. Most Indians fly via the Middle Eastern (ME) hubs of Dubai, Abu Dhabi and Doha, relying on the major Gulf carriers Emirates, Etihad and Qatar Airlines, which have been the de facto national airlines for Indians for more than two decades.
Indian airports, especially Delhi, Mumbai, Bengaluru and Hyderabad, have emerged as the biggest challenge to the ME international hubs, as they are strategically located. Nearly, 30-50% of the world's population can be reached within five to eight hours by air (including Dubai, Hong Kong, Singapore, Malaysia, Maldives, Bali and Thailand), providing Indian airports a unique geographical advantage for international travel.
Indian carriers now serve 42.7% of all international routes. This is an increase from 36% pre-pandemic.
Indian carriers could further grow in international routes, given a recent request by the aviation minister for domestic carriers (historically Indian) to fly more long-haul routes. It was also reported that India will not be increasing air traffic quotas for carriers from Gulf States in line with this push for Indian carriers to fly long-haul routes.
