Airline industry set for growth

Keeping in view the aircraft orders and high load factors, the Indian airline industry is set for stellar growth. The journey of Indian air travel market from 200 mn to 500 mn passengers and a fleet size of 700 to 1,500 planes will set the broad contours

The Indian air market, including domestic and international, was estimated at 1,743 billion ($21.8B) in FY23, surpassing the pre-pandemic levels of

1,502 billion ($21.2B) in FY20. It is projected to rise to 2,824 billion ($35.3B) by FY26, growing at a CAGR of 17.4 per cent during FY23-FY26, says VIDEC’s India Air Travel Market Sizing & OTA Benchmarking Study, FY20-FY26, which gives an overview and analysis of Indian air travel market opportunity, along with the India based OTA landscape.

The VIDEC’s report says that the Indian economy is characterized by rapid urbanisation, a burgeoning middle-class, and a young demography. The share of middle-class households is expected to rise from 31 per cent in FY21 to 47 per cent in FY31. More than one-third of the 1.4 billion population lives in urban centres, and around twothirds is between 15 and 64 years old. All these factors add up to an optimal environment for growth of consumer aspirations that cultivates a high propensity to travel. Air is the only mode of transport that commands an aspirational value and is, therefore, set to be the biggest beneficiary of the India growth story. Air travel penetration in India, at 0.1 trips per capita (versus 0.5 trips per capita in China) still has phenomenal room for growth. This indicates a long runway for expansion of the air travel market. As of March 2023, 17 scheduled local airlines were operating in India with a total fleet size of 718 aircraft. On international routes, 74 foreign carriers operate flights to/ from India.

Indian airlines are on a buying spree with an order book of about 1,500 aircraft, expected to be delivered over the next 10 years.

Findings of the study are:

❖ The domestic air gross booking value (GBV) stood at ₹ 781 billion ($9.8B) in FY23, up 30 per cent from ₹ 601 billion ($8.5B) in FY20 and is expected to reach

₹ 1,156 billion ($14.5B) by FY26, with a CAGR of 14 per cent during FY23-FY26.

❖ The international air GBV was estimated at ₹ 963 billion ($12B) in FY23, up from ₹ 901 billion ($12.7B) in FY20. It will grow at 20 per cent CAGR for the next three fiscals, reaching ₹ 1,667 billion ($20.8B) in FY26.

❖The online air market was estimated at ₹ 762 billion ($9.5B) or 44 per cent total air GBV in FY23. It is projected to reach ₹ 1,263 billion ($15.8B) by FY26.

❖The domestic online market is highly penetrated at 67 per cent, in stark contrast with the international segment at 25 per cent in FY23.

Indirect channel (OTAs) is the dominant online distribution channel for air with a market share of 81 per cent of online domestic air

GBV and 66 per cent of online international air GBV in FY23.

❖ The Indian OTA air market was valued at ₹ 583 billion ($7.3B) in FY23 and is projected to grow at 20 per cent CAGR during FY23-FY26, rising to ₹ 984 billion ($12.3B).

❖ The OTA air category is led by the pioneer, MakeMyTrip Group with a market share of 57 per cent in OTA air GBV in FY23. Cleartrip came a distant second at 13.7 per cent share, EaseMyTrip neck-to-neck at 13.4 per cent share, followed by Yatra with 9.4 per cent share.

❖ India’s total flown passenger stood at 192 million in FY23, just shy of pre-pandemic levels in FY20. The domestic passenger traffic at 137 million in FY23 has recovered almost fully to FY20 levels, whereas international passenger traffic is trailing at 54 million, recording 90 per cent recovery.

❖ The low-cost carriers (LCCs), led by Indigo, dominate the domestic skies, flying 113 million (82 per cent) of all domestic traffic in FY23. The aggressive pursuits by Tata Group could tilt the share in favour of full-service carriers (FSCs) to some degree. Together, Indigo and Tata Group airlines flew every four in five domestic passengers.

❖ India’s international airlift has long since been overshadowed by foreign carriers – they enjoyed a 56 per cent market share in all international airlift from India in FY23.

❖The only air segment to surpass its pre-pandemic level is the international traffic on local carriers – they flew 24 million passengers in

FY23, with a market share of 44 per cent (versus 38 per cent in FY20) in all international airlift from India.

India Online Air Market

The online air market was estimated at ₹ 762 billion ($9.5B) in FY23. It is projected to reach ₹ 1,263 billion ($15.8B) by FY26, or 45 per cent of the total air GBV. The online penetration peaked at 49 per cent in FY21, because of a near-standstill in international demand.

The online travel agency (OTA) air category is led by the pioneer, MakeMyTrip Group with a market share of 57 per cent in OTA air GBV in FY23

India OTA Air Market

The Indian online travel agency (OTA) air GBV stood at ₹ 583 billion ($7.3B) in FY23, beating the FY20 levels by more than 30 per cent. It is projected to grow at a robust CAGR of 19 per cent during FY23-FY26, reaching ₹ 984 billion ($12.3B). OTAs remain the dominant online distribution channel for air. On the domestic segment, OTAs grossed

₹ 427 billion ($5.3B), with a market share of 81 per cent of online domestic air GBV while OTA air GBV in international segment amounted to ₹ 156 billion ($2.0B).