Indian Airline Industry Expansion On Track As 50% Market To be Captured by FY28

CRISIL, a credit rating company, reported that India’s domestic airlines are projected to boost their share of handling international passenger traffic originating from the country to 50% by FY2027-28, up from the approximately 43% recorded in March 2024. Indian airlines seem set to lead the improvement by increasing their fleet size, opening up new international routes, and leveraging their superior domestic connectivity, giving them a competitive edge over foreign competitors.

Rise after the Pandemic

In FY24, India’s international passenger traffic surged to about 70 million, exceeding the pre-pandemic level of 67 million despite dropping to nearly 10 million in the pandemic-affected FY21. Post-pandemic, there’s a noticeable shift in spending habits, with Indians increasingly favouring international leisure travel. This trend is propelled by rising disposable incomes, eased visa regulations, expanded airport infrastructure, and enhanced air travel connectivity, all driving the growth of international tourism.

Expansion driving growth

India’s domestic airlines aim to seize a significant portion of the growing international passenger traffic, which typically yields higher profits and faces less competition than domestic routes. Over the last 15 months, these airlines have introduced 55 new international routes, bringing the total to over 300. These routes include direct flights from more cities to popular destinations in the United States, Europe, and Australia. 

Additionally, Indian airlines plan to increase the number of aircraft operating on short and medium-haul international routes and utilize codeshare agreements with major global airlines to provide seamless onward connectivity for passengers.

Government’s Initiatives

The government is emphasizing positioning India as a tourism hub to drive up inbound traffic and boost the economy through the tourism sector. According to Crisil Ratings, there is a forecasted compound annual growth rate (CAGR) of 10-11% in international passenger traffic over the next four fiscal years, far exceeding the growth rates seen before the pandemic.

Conclusion: Indian airlines are positioned for substantial growth in handling international passenger traffic, with projections indicating an increase to 50% share by FY2027-28 from the current 43%. With 55 new international routes added in the last 15 months, totalling over 300, and a forecasted 10-11% CAGR in international passenger traffic over the coming years, Indian carriers are set to drive significant growth and economic benefits fueled by initiatives such as fleet expansion, route diversification, and leveraging domestic connectivity advantages.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.