Note4Students

From UPSC perspective, the following things are important :

Prelims level: NA

Mains level: Indian Aviation Sector

aviation india

Central Idea

IndiGo, India’s largest airline, recently made history by placing an order for 500 planes, setting a new world record.
This landmark deal comes on the heels of Air India’s order for 470 aircraft a few months ago.
This article explores the transformative impact of IndiGo’s order and its implications for the future of Indian aviation.

IndiGo’s Order and its Implications

Doubling the Current Fleet: IndiGo’s order brings their total aircraft count to 1,330, almost twice the size of the current Indian aviation market.
Fueling Connectivity: Expanded capacity expected to enhance domestic and international connectivity.
Global Impact: Improved direct connectivity across Europe and South Asia as a result of the record-breaking order.

aviation

Big market: India ranks as the third-largest domestic aviation market globally, with significant annual domestic air traffic.
Lower air travel penetration: India has the potential to become the third-largest international aviation market, given the substantial gap between current air travel penetration and potential demand.
Shift in Market Dynamics: Competition is intensifying with the emergence of strong players like Air India and Akasa Air, challenging IndiGo’s dominance.
Targeting New Destinations: IndiGo eyes expansion into Europe and East Asia, while Air India aims to surpass foreign carriers in flights to the US and Europe.
Focus on Multiple International Hubs: The government encourages airlines and airports to develop multiple international hubs within India.

IndiGo’s Market Share: Holding a commanding 61.4% market share according to the Directorate General of Civil Aviation.
Air India Umbrella: Combined share of Air India, Vistara, AirAsia India, and Air India Express at 26.3%.
Duopoly: IndiGo and Air India’s combined market share of 88% signals a duopoly in the industry.
Challenges for Competitors: Limited means and strong promoter groups leave other airlines struggling to scale up.

Unregulated Air Fares: Unregulated air fares in India subject to market dynamics.
Supply Chain Issues: Delivery delays due to supply chain challenges impacting fares.
Temporary Suspension Impact: Go First’s operational suspension leading to reduced flight availability and higher air fares.
Long-Term Stabilization: Potential for fares to stabilize as airlines increase capacity over time.

Anticipated Orders: CAPA India predicts Indian airlines to order 1,500-1,700 planes in the next two years.
Recent Orders: IndiGo and Air India have already placed orders for 970 aircraft.
New Entrant: Expectations of additional orders from Akasa Air, a new airline in India.
Conversion Options: Air India’s 370 optioned aircraft can be converted into firm orders later.
Replacing Aging Fleet: Older aircraft retiring necessitate new orders for efficient and modern replacements.

Economic Growth and Rising Middle Class: India’s fast-growing major economy and expanding middle class create strong air travel demand.
Untapped Market Potential: Under-penetrated aviation market offers significant growth opportunities for airlines.
Airport Development: Construction of new airports across India fuels the demand for air travel.
Resilient Recovery: Surpassing pre-COVID passenger numbers, indicating a resilient bounce-back in the sector.

Debt Burden: Air India’s acquisition by the Tata Group poses the challenge of raising substantial funds, given the airline’s existing debt.
Financial Implications: Securing a loan of the required magnitude may prove challenging, impacting the financial viability of the deal.
Make-in-India Clause: The inclusion of a Make-in-India clause in the final agreement is crucial to ensuring direct economic benefits for the Indian economy.
Potential Concerns: Without adequate provisions, India may become a mere customer of goods without reaping significant economic advantages.
Costly Operational Environment: The Indian aviation industry grapples with high operating costs, including fuel expenses, airport fees, and taxes, which can impact profitability.
Profitability Concerns: The industry needs to address these cost challenges to maximize the returns from the influx of new aircraft.
Outdated Infrastructure: Obsolete air traffic control systems, inadequate ground support services, and limited airport capacity pose barriers to efficient operations.
Regulatory Framework Limitations: The industry faces difficulties due to regulatory complexities and limitations that hinder growth and innovation.

IndiGo’s record-breaking aircraft order, coupled with Air India’s recent purchase, is poised to revolutionize the Indian aviation industry.
With increased capacity and enhanced connectivity, this landmark development is set to propel economic growth and benefit both domestic and international travellers.
As India’s economy continues to thrive and air travel demand remains strong, airlines are optimistic about the future, heralding a dynamic era for the Indian aviation sector.