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India has an expanding economy. With the rising incomes and a large population of young people eager to travel, airlines are taking aggressive strategies to attract them for higher revenue.
The emerging economy along with a travel minded youth class has made India the world's fastest-growing and most competitive aviation market. Domestic passenger traffic is expected to double to 60 million by 2010 and reach 200 million by 2020. Currently, some 650 air flights take off daily from India's 95 operational airports; this rate was only 200 three years ago. That figure is likely to nearly double to 1,200 by 2010.
Industry consolidation started rolling ever since a crop of eight new airlines hit the Indian skies in the last three years. Most were budget carriers set up by entrepreneurs who quickly placed tremendous downward pressure on fare prices. They all have been chasing the estimated 300 million middle-class Indians who have been enjoying rising disposable incomes and now have the financial wherewithal to travel at home and abroad. The lucrative market also encouraged merger of the state-run domestic and international carriers—Indian Airlines and Air India. Chennai-based business carrier Paramount Airways plans to acquire a substantial stake in GoAir, another no-frills budget carrier.
Among India's passenger carriers, however, the outlook is challenging as long as the fare wars continue. Discounted tickets represent 20% of total fares in India vs. a global average about 10% to 15%. On top of that, the scarcity of airports in India has meant higher landing and maintenance fees, another drag on profits. Major international aircraft manufacturers such as Boeing, Airbus, ATR, and Brazil's Embraer are knocking to win orders. Boeing plans to increase sales of its 125-aircraft fleet by double by 2011. If so, that would mean about a $20 billion revenue haul for Boeing.
With more than 100 Airbus planes operating in India, the European concern's new orders have come from startup airlines such as Air Deccan, Kingfisher, Spice Jet, and GoAir. Indian skies are now so congested that it's not unusual for passenger jets to spend an hour circling around an airport and waiting for a landing slot, which drives up the fuel costs even on short-haul trips and adds up to 10% in additional costs. The three consolidated groups Air India, Jet Airways, and Kingfisher dominate the Indian skies with an 85% market share.
Other low-cost carriers could be in play soon. Needs for engineering, maintenance and repair, ground services, and route networking and planning has come up. Indian authorities should respond quickly to smooth up the flying of the airlines so that the industry can grow as expected.
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