India’s aviation industry is poised for significant growth and transformation in 2024, driven by key players and infrastructural advancements.
The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three years. The total number of domestic passengers in 2014 was 60 million which more than doubled to 143 million in 2020 prior to the Covid-19 pandemic.
In terms of aircraft, the numbers have increased from around 400 in 2014 to 723 in 2023 despite the disruptive impact of the pandemic. Currently, the country has 148 operational airports including 137 airports, 2 water aerodromes and 9 heliports. The above statistics are an indication that the future of Indian aviation is brighter than ever. In this article, we examine the key developments that will shape the growth of the Indian aviation industry in 2024.
- Competition between Indigo and the Air India group to dominate the Indian market
The two main players in the Indian skies are Indigo and the Air India group. Presently, Indigo has a market share of around 60 percent, followed by the Air India group airlines with about 26 percent. Both of them have aggressive expansion plans. Air India is aiming to secure market leadership in the long and ultra-long haul segment, which is key to its business. Indigo will look to continue its domination of the domestic market, while looking to expand its international market footprint.
- Expansion of Akasa (launch of international services)
Akasa Air is set to purchase 150 737 MAX aircraft increasing Akasa Air’s total orders from Boeing to 226, with deliveries slated through 2032. Akasa Air has already announced the launch of international operations recently. The carrier currently serves 16 destinations with 24 aircrafts and has captured nearly 4 percent of the domestic market.
- Revival of Spicejet
Spicejet is raising fresh capital of over $270 million from Elara India Opportunities Fund, Aries Opportunities Fund, Mahapatra Universal, Nexus Global Fund, Prabhudas Lilladher and Resonance Opportunities Fund. The fund raise is expected to help mitigate the airline’s liquidity crunch, enhance operational capabilities, and position the airline again for sustained growth.
- Induction of new aircraft and shortage of pilots
While the aviation market has been growing, pilot shortage is a perennial challenge. Recently, Akasa Air sued 43 of its former pilots for leaving without serving a six-month notice period leading to hundreds of flight cancellations for several weeks. Further, the Directorate General of Civil Aviation (DGCA) is facing a shortage of staff at key positions, leading to delays in issuing licenses to trained pilots. These issues are likely to continue in 2024.
- Inadequate MRO facilities within India
Presently only around 15 percent of the MRO activity for Indian airlines is conducted in India. With two of the largest aircraft orders ever from IndiGo and Air India on Airbus and Boeing last year, India stands out as a significant aircraft buyer. However, for want of MRO services in the country, a major chunk of this business is lost to MROs overseas. Hopefully, 2024 will see a push from the airlines for the engine and aircraft manufacturers to set up MRO services in India.
- Supply chain issues/engine issues
IndiGo, India’s largest airline, has grappled with persistent Pratt & Whitney engine issues on its Airbus A320neo planes for the past 5-6 years. Go First has also faced similar engine issues. Supply chain/aftermarket issues are likely to continue in 2024 as OEMs are focused on new deliveries and the grounded aircraft/engines may unfortunately continue to remain grounded.
- Go First Insolvency
The fate of Go First Airlines will be decided in 2024. In May 2023, Go First filed for bankruptcy. A year later, the airline’s fleet of over 50 aircraft was deregistered following an arduous legal battle with the lessors. The insolvency resolution process has been extended until June 2024 and two bids have been submitted for Go First, with Ajay Singh and Nishant Pitti from Busy Bee Airways offering INR 16 billion in a joint bid, and Sky One presenting an alternative offer. However, the hopes for revival of the airline have been diminishing as time passes and it is likely that the airline will end up being liquidated.
- New destinations and enhanced airport capacity – Ayodhya, Goa, Port Blair, etc.
The Indian aviation industry is undergoing a significant transformation with the government’s focus on easing air travel and developing world-class infrastructure. A privately-operated second airport in Goa, Manohar International Airport, completed one year of operations in January 2024, marking the successful run of the very first dual airport system in India.
Soon there will be dual airports even in Mumbai and Delhi, hopefully easing the traffic congestion at the existing airports in these cities. An international airport has also been inaugurated at Ayodhya.
- GIFT City and aircraft leasing
IFSC Gift city has seen the registration of 26 aircraft leasing companies in the past three years. Over 129 aviation assets have been leased through the Gift city, including 18 aircraft, 55 engines and 56 ground support assets. Air India is directing its aircraft leases through its aircraft leasing entity in GIFT City and Indigo is likely to follow suit. While, India has to improve its rating at the repossession index, if supported by the right regulatory, legal and tax framework, GIFT City is likely to become a hub for aircraft finance and leasing activities in the times to come.
Authors: Ramesh K. Vaidyanathan, Managing Partner, BTG Advaya
Mansi Singh, Partner, BTG Advaya
