Skybound Ascent: A Journey through the Evolution of Domestic Aviation in India

Domestic Aviation in India: The Past, Present, and Future

The domestic aviation industry in India has come a long way in the past few decades. From being a fledgling industry with just a handful of players in the 1990s, domestic air travel in India has now grown to be one of the largest and fastest growing in the world. Let us take a look at some key aspects of the domestic aviation sector in India - its history, current scenario and future projections.

The Early Years
In the early post-independence years starting in the 1940s and 50s, the aviation sector in India was dominated by state-run carriers like Indian Airlines. However, growth was slow due to licensing constraints and limited infrastructure. It was not until the early 1990s that the sector was opened up to private players through the Historic “Five Freedoms” deal that granted three new carriers the right to operate local flights. This ushered in a new era of competition and growth.

Players like Jet Airways and Sahara Airlines entered the fray along with state-run Indian Airlines, sparking a dramatic fall in airfares and increase in connectivity. More routes were opened up linking smaller cities. This marked the beginning of the rise of domestic air travel in India, though capacities and frequencies were still fairly limited.

Current Landscape
Fast forward to 2022, and domestic aviation in India is virtually unrecognizable from three decades ago. Major developments include:

- Liberalization resulting in over ten private carriers operating today along with state-run Air India. Ultra-low-cost carriers like IndiGo, SpiceJet and GoAir now dominate over 70% of the market.

- astronomical traffic growth - from just 8 million passengers in 2000 to over 150 million currently, registering a compound annual growth rate of over 15% over two decades.

- Vast expansion of routes networks - from just about 25 destinations in 2000 to over 100 airports across India today. Megacities are now linked to smaller towns.

- Fleet modernization - Indian carriers have retired aging aircraft and inducted fuel-efficient narrowbodies like A320s and B737s helping lower costs and drive higher densities.

- Change in passenger profile - air travel has moved from being exclusive to elites to masses. First-time flyers are a key driver of current growth.

- Infrastructure growth - with new airports, runway expansions, and policy support, India will have over 220 operational airports by 2023 from just 75 in 2000.

- Revenue growth - from around $1.5 billion in 2000 to over $20 billion currently, domestic aviation revenue in India is now larger than several industries.

Challenges Ahead
While domestic aviation has brought unprecedented connectivity and economic benefits to India, challenges remain in sustaining the momentum. Key issues include:

Infrastructure Bottlenecks
Despite massive investments planned by Airports Authority of India, infrastructure gaps still persist at many airports in the form of inadequate terminal capacity, lack of advanced facilities, night parking bays and MRO centers. This leads to congestion, delays and rising costs.

High Aviation Turbine Fuel Costs
Fuel constitutes over 40% of operating costs for Indian carriers. With limited options for fuel hedging, volatility in crude prices poses a major risk. The inability to pass on higher costs to passengers has led airlines to losses during periods of high fuel costs.

Competition and Overcapacity Issues
Fierce price wars amid overcapacity on major trunk routes have led to unsustainable fares, rising debt levels and casualties like Kingfisher Airlines. Routes where viability gaps exist need to be dealt with carefully through capacity rationalization or Viability Gap Funding support.

Policy and Regulatory Challenges
While the UDAN scheme has augmented regional connectivity, long-term fiscal viability of these routes remains uncertain. Strict regulatory policies on slot allocations, 5/20 rules also need review given evolving market dynamics and carrier priorities.

The domestic aviation industry in India has undoubtedly come a long way from its nascent inception, now becoming the third largest by domestic passenger traffic globally. However, sustaining high growth in the coming decades requires addressing infrastructure bottlenecks, bringing down costs through policy interventions and innovation, and fostering a stable and pro-growth regulatory environment. With skyrocketing demand, enhanced connectivity and more players, the future for domestic aviation in India remains bright if these challenges are addressed proactively and holistically through coordinated efforts of industry players and policymakers.