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Indigo pilots aviation growth

April 11, 2018 Headline News No Comments Email Email

India is the fastest growing aviation market and Indigo, the largest airline in India and fourth largest LCC in the world, has grown at 24 percent in last few years to add to India’s unprecedented double digit growth in aviation. The lead airline has set examples and is seeking state support in keeping-up the pace to grow tourism.

Aditya Ghosh, CEO, Indigo, said: “India’s a unique opportunity with the population of 1.3 billion people, has a projection to grow aviation at more than 10 percent. One can’t think of another industry in the country or the world that has a kind of sustained growth at that kind of scale. It is an exciting time to be in this place at this time.”

In 2006 India had a total of 18 million passengers among all airlines put together. Indigo alone carried 50 million passengers this year. Mr Ghosh said: “We haven’t even scratched the surface. India is third largest aviation market in the world, grown six positions ahead in last six years alone. The growth is here to continue.” Mr Ghosh was a keynote speaker at the recent Travel Agents Association of India (TAAI) Annual Convention in Srinagar.

An Indigo flight

National Civil Aviation Policy’s target of half a billion domestic air travellers in India in next nine years may be too optimistic, but Centre for Asia Pacific Aviation(CAPA)’s statistics predict the same half a billion and a quarter billion in Indian domestic and international air passenger growth by 2050.

Kapil Kaul, CEO, CAPA India, said: “India has added 150 million passengers in last 13 years. Still we’re an underpenetrated market in the world with only 4.4 percent population having travelled by air. Passengers travelling for pure leisure are only 3 million each in international as well as domestic and the future holds an unprecedented growth and opportunity for the travel industry.”

Current number of total aircraft in India is 550 airplanes, less than the size of fleet of one South West Airlines in the United States, which has a third of India’s population.

CAPA’s recent research for a turboprop manufacturer has projected 1 billion domestic and half a billion international Indian air passengers in 40 to 50 years.  This will see 150 billion dollars invested directly into domestic and international connectivity just in scheduled air services. Current airport capacity is a challenge and requires 200 billion dollars in next decade and a half.

Mr Ghosh said: “Tourism and travel have a symbiotic relationship. Air connectivity immediately gives an impetus to tourism; cuts travel time and money spent in getting to the destination. Almost 10 percent of India’s GDP is contributed by tourism alone, supporting 41 million jobs, third highest in the world. The industry had not been in agenda for long, has seen a quiet start and rapidly moved up the ranks.” The industry is expected to contribute half a trillion dollars of economy every year, in a few years time.

India currently ranks 40th in tourist arrival figures.  Aviation and GDP growth have a co-relation. When Indian GDP has grown at 7 to 8 percent, aviation industry has grown at twice, 15 to 20 percent. Mr Ghosh said: “If India can even sustain GDP growth at 6 to7 percent, the industry can see 15 percent growth. Domestic travel is contributing 90 percent of our business. 85 percent of our capacity is dedicated to domestic growth, as the potential lies within India and we have to make most of it.”

Indigo has often proven the exponential benefit it creates to a place where it begins new flights. For example, it added 4 daily flights to Udaipur in 2014. The Royal city that earlier had only palace hotels and some guest houses, now has accommodation available at every strata and the city’s economy has expanded.

Average domestic flights have more than doubled in Goa in last 9 years. 25 percent of flights are departing between 10 and 6 at night, which was the time restricted for operations earlier. Goa has become not just 365 day destination, but a 24/7 airport. Srinagar has seen 75 percent jump in fleet from the time Indigo started a few years ago. It’s now connected to tier two and three cities as well. Bhubaneshwar, which was not really considered as a tourism potential destination, has seen 250 percent rise in flight operations in last five years.

Growth comes with challenges. Supply side constrains and institutional safety and security architecture will be the biggest challenges with skill infrastructure as another. Airport saturation is expected to happen in next five years. Transformational impact will be on other infrastructures like hotels, multi-nodal infrastructure and surface infrastructure that will need to augment the growth.

Rapid commoditisation is taking place. More and more seats are being added to accommodate more passengers on the same aircraft. Mr Kaul mentioned of an airline’s demand with Indian Director General of Civil Aviation (DGCA) to consider letting it do away with toilets on aircraft. Distribution will be important too. Mr Kaul sees no linkages between growth and profitability, with fuel cost being the biggest factor affecting revenues.

Mr Ghosh said: “We need to re-imagine this industry and re-imagine the way we run our businesses and the way we approach to unlock the potential of destinations. All we need is an enabling environment and enough potential and capability in the private sector to take this country to a completely different level. Biggest help we need from the Indian and State Governments is in just helping us lower our input costs like airport fees, fuel taxes and costs due to infrastructure constraints.”

India has one of the lowest average airfares in the world, ranking 75th in the average airfares across 100 countries in the world, yet airlines are burdened with heavy levies. The Government can help by clearing some of these blocks like most Indian states levying 26.25 percent sales tax on aviation fuel and restricting flight operations during night at some airports.

Mr Ghosh said: “Extend watch hours and push to 24 hours operations and we can create the Goa model. Hotels, road transportation, all other infrastructure will follow. Better airport infrastructure has to go hand in hand with parking bays etc”.

Indian government’s UDAN program is opening up several underserved and unconnected airports through subsidised offerings to airlines. Indigo has ordered the largest turboprop aircraft to connect to smaller Indian cities. The LCC will have 20 turboprops in a year’s time. Connections to cities like Tirupati, Rajamundri and Vijayawada have seen airfares come down, load factors go up.

Mr Ghosh said: “These experience in last ten years have made us dream large. Today half our flights touch non-metro cities of India. What we further require are inexpensive airports; simple, box like structures with a bunch of parking bays and one or two runways with good security.” All international hubs being outside India in Europe, Asia or Middle East and is unfortunate.

He said: “it’s time to bring back those international hubs to India, to unlock the big potential. All it takes is better baggage infrastructure, better management and a little bit of imagination. In a few years time, India will double its aircraft fleet to 1000 and will get a firm foothold in the international tourism market”.

Written by Anand & Madhura Katti

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