
Inside indian aviation’s high-stakes battle

Summary
Between FY19 and FY23, Indian carriers have gained more share of international trafficNew Delhi: By 2014, a controversy around bilateral foreign flying rights—air service agreements between two countries—was simmering in India. A few years earlier, the Comptroller and Auditor General (CAG) had, in a report, questioned the liberal award of such rights by the ministry of civil aviation to many countries, especially those in the Middle East. This impacted Air India, then India’s state carrier, the CAG report pointed out. The struggling airline was living on taxpayers’ money. In 2012, the government approved a bailout package that totalled ₹30,231 crore.
In an ideal world, bilateral rights are supposed to help airlines from both sides. It allows airlines from respective countries to operate flights within a quota. For instance, India and Dubai have a bilateral agreement that allows airlines from each side to operate flights totalling 66,000 seats per week.
Why did it put Air India at a disadvantage? Travellers don’t just fly from country A to country B. They may need a connecting flight to a third country. International carriers operate through large hubs in their home countries and simply take passenger traffic originating in India away, beyond their home bases. In aviation parlance, it is known as ‘sixth freedom traffic’.

The Bharatiya Janata Party-led National Democratic Alliance began to deliberate on the rights soon after winning the general elections in 2014. Narendra Modi was yet to be sworn in as the Prime Minister. One day in May 2014, at the Gujarat Bhawan in New Delhi, he wanted to be briefed on key political issues. The award of foreign flying rights came up in one of the presentations made.

“It was clear from those initial discussions that the policy on bilaterals will get stringent, going ahead. It would not be as liberal as earlier," said a person involved in those discussions during the time. He did not want to be identified.
Subsequently, most bilateral foreign flying requests were refused, particularly from countries that operate bigger and stronger airlines.

The strategy worked, at least to some extent. Data analysed by Mint shows that Indian carriers now have more passenger share of the international traffic, to and from India. The market share of Indian carriers has inched up to 44% in 2022-23 from about 40% in 2018-19. Meanwhile, the share of foreign carriers reduced to 56% from about 60% in the same period.
Indian carriers were able to increase their share despite Jet Airways going out of business. In 2018-19, Jet had a little over 12% of the total international market. The airline ceased operations in April 2019.
So, which airline gained the most?
IndiGo’s rise
The void created by Jet Airways was filled by InterGlobe Aviation (IndiGo), which registered a huge jump of 82% in terms of international passengers carried (8,539,158), between 2018-19 and 2022-23.

IndiGo’s international expansion strategy has been three-pronged—expand on its own, through code shares, and through leased Boeing 777 aircraft from Turkish Airlines. Boeing 777 is a wide-body plane and they feed the traffic to Istanbul. Wide-body aircraft has two aisles inside and fly long distances.
The airline’s codeshare partners include Air France—KLM, American Airlines, Virgin Atlantic, Qatar, Qantas, and Turkish Airlines.

“We have 33 European destinations that we are able to sell via our codeshare with Turkish. In addition, we are seeing a huge amount of traffic via the Istanbul gateway to these destinations," Vinay Malhotra, head of global sales at IndiGo told Mint.
Malhotra added that IndiGo’s strategy will be to develop new international markets from India. Flights to destinations such as Tbilisi, Baku, Tashkent and Almaty are in the pipeline. “These are not the traditional routes that Indians fly to. We are adding newer destinations. These are all touristy places. Of course, tourism and trade are almost hand in glove," he said.
Analysts, however, say that IndiGo’s international strategy needs more wide-body planes. “IndiGo needs to have a wide body induction plan to be able to sustain international growth beyond codeshares," said Mark Martin, founder and CEO at Martin Consulting, an aviation consultancy.

The airline company is set to order 25 wide-body aircraft, Mint reported in April this year. Malhotra did not confirm but said that the company will start inducting Airbus A321 XLRs from 2025 onwards. About 70 XLRs are expected to be delivered.
A321 XLRs are single-aisle planes but can fly longer distances—IndiGo, for instance, can fly from Delhi to Amsterdam, which takes about 8 hours. IndiGo’s fleet today consists of Airbus 320 and 321s, which can fly shorter distances.
“With XLRs, we will be able to reach many more destinations than we fly to today, non-stop. It will open a plethora of opportunities for our travellers and for us as an airline," he added.
Air India, the big brother
Air India, meanwhile, will play the role of a big brother in the international skies. Its network spans across the globe.
The Indian government sold its stake in Air India to the Tata Group in January 2022. Soon after, the conglomerate announced a deal to purchase 470 aircraft. The order includes 70 wide-body aircraft. This will add to the 45 wide-body planes Air India already operates; Vistara, another Tata airline, operates seven of these big planes. Vistara will merge into Air India by next year.
Air India’s plan, however, is not just limited to long-haul routes. It wants to expand aggressively in the short-haul international network through Air India Express, a low-cost subsidiary of Air India.
“Both the low-cost and the full-service network will complement each other," said an executive from the group. He didn’t want to be identified.
Hub dreams
In conclusion, IndiGo and Air India are the two big engines of India’s new aviation story. While they stand to benefit the most from the government’s strategy on bilaterals, there is a good chance of some Indian airports emerging as international transit hubs.
With growing share of international passenger traffic, IndiGo recently reported that more passengers are also transiting through Indian airports. “Earlier, the Indian airports were merely destination airports. Today, there’s a rising trend of people flying in from other countries to Delhi, Mumbai, Hyderabad and Kolkata. They take an onward flight without exiting any Indian city," Malhotra said. Examples include travellers flying on routes such as Dubai-Bangkok, Bahrain-Phuket, Kuwait-Phuket, Sharjah-Jeddah, Dhaka-Riyadh, and Kathmandu-Far East.
In terms of infrastructure, Indian airports are getting better and bigger. As Indian airlines offer more seamless connections, the country’s hub dreams are likely to take wing.