Indian aviation reports best-ever first half in 2024; IndiGo, Tata group airlines fly high; SpiceJet biggest loser

Indian aviation reported the best-ever half-year traffic this year, recording 7.93 crore passengers between January and June this year, compared to 7.60 crore passengers during the same period last year. Thus far, 2023 has been the best-ever year for domestic aviation in India, when it surpassed the pre-COVID numbers by 5.77 per cent. The current numbers are 12.3 per cent higher than those of 2019, the last full year before the pandemic. India is one of the few countries which was fast to bounce back and record higher than pre-pandemic numbers last year. This year is only reinforcing its growth story, though the challenges continue.

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While June saw a drop in passengers compared to May, this was the best-ever June for domestic air traffic in India with 1.36 crore passengers flying as compared to 1.24 crore in June 2023. Last May saw the collapse of Go FIRST, which had led to a small portion of capacity being pulled out of the market.

What does it mean?

IndiGo, one of the two listed airlines in India, flew in record profits last financial year. There is a severe shortage of planes in the country, which is holding back growth. While IndiGo has a fleet of over 350 aircraft, anywhere between 70 and 80 are grounded due to faulty engines. SpiceJet has not been able to resolve issues with lessors or shore up funds to repair its aircraft and make them flyworthy. Akasa Air has not had an induction since February this year. The effective fleet in the country is much less than the 800 aircraft which are registered with commercial airlines in the country.

This has led to an increase in fares with many complaining of having to pay double or more of what pre-COVID fares used to be. Departures are up only 2.5 per cent, lower than the traffic increase. Capacity by ASK is up 3.7 per cent. All of this indicates load factor being firmed up and higher load factors on the back of higher fares.

Who is benefitting?

IndiGo and the Tata group of airlines are the ones who are benefitting the most from the growth in the market. Pre-COVID - Air India (then government-owned), AirAsia India (now AIX Connect) and Vistara had a market share of 24.1 per cent. Today, the four Tata group airlines have a market share of 28.7 per cent. IndiGo’s market share was 47.1 per cent at the end of 2019, while it peaked well above 60 per cent before stabilising around this number after it faced headwinds with the engine availability and grounding.

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SpiceJet has been the biggest loser, largely due to its own reasons rather than the market, with its market share dropping below 4 per cent in June and closing Q2-CY24 with just 4.2 per cent. More often than not, market share is a function of capacity share and deployment in the market.

Akasa Air, Air India, and IndiGo were the top three airlines by stop compliance as of May, wherein the airlines were using almost all of the slots that were granted as part of Summer Schedule allocation. Air India Express and SpiceJet have been the worst performers in slot usage as of May 2024.

Tail Note

Every month this year has seen higher air traffic compared to the same month last year. The situation last year was similar compared to 2019 for all months except November. The steady growth of 5 per cent thus far could translate into the year closing with 16 crore passengers - a first for the Indian domestic industry.

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The second half typically sees slightly higher capacity deployment than the first half. Going by the aircraft delivery plans, Air India Express and IndiGo are likely to receive more aircraft in the second half than they did in the first. The availability of T1 at Delhi airport after the incident last month has been in doubt. The largest airport in the country is operating with just two terminals and overburdened. As and when T1 is available, it could open up new flights helping passengers and passenger numbers.