3 min read.Updated: 19 Feb 2021, 04:24 PM ISTRonojoy Dutta
Airlines provide a low capital investment for nations to build and sustain their infrastructure proficiently and swiftly. Moreover, a strong aviation sector will create employment opportunities across a multitude of industries, while simultaneously integrating the country
2020 has been an extremely difficult year for the industry with plummeting passenger volumes and unprecedented losses. We are steadily moving towards recovery, but a definitive prediction of the exact shape of revival of air traffic seems difficult. Therefore, it is better to extend the time horizon a little and discuss the longer-term outlook for Indian aviation.
India has an extraordinary story - a high growth economy coupled with low air travel penetration. India’s GDP is forecast to grow anywhere between 6 and 8 percent, a major chunk of which is expected to come from India’s middle class. Despite this, India remains one of the least penetrated markets for airline travel with only 5 percent of citizens acquainted with air travel. India’s diverse geography, internal migration, and strong family ties, coupled with growth in income, will drive a sharp growth in air travel in years to come.
The aviation environment in India has been tough for years, with one of the highest cost structures in the world, owing to high taxes and a steady erosion in the rupee dollar exchange rate. This has resulted in continuous upward pressure on fuel, maintenance, and leasing costs. Nevertheless, air fares in India are among the lowest in the world. This high cost, low price environment allows airlines no room for error, and yet many were distracted by dreams and ambitions that veered off from the operational realities. There is a need to focus on costs and calibrated expansion in order to survive in this environment. Government’s stance on high taxes may not change anytime soon, however, there still exist a ray of hope that India’s growth story will eventually reduce issues arising out of a steadily declining currency.
There is higher optimism on the revenue side. Even though business traffic will stay on the backseat for some time post the pandemic, the substitution from rail traffic to airline traffic should be able to make up for these volumes. Tier 1 cities are showing robust post-pandemic demand, largely driven by SME and VFR traffic. As for the international demand, it looks that it will continue to be an area of concern all through the year and we anticipate slower recovery on that front. India’s price per airline ticket should also steadily increase as income levels grow slowly. Airline fares do not necessarily need to be around the levels in the developed world. Reaching fare brackets in countries like Thailand and Indonesia would be sufficient for Indian aviation to exit from the hostile operating environment of the past.
India’s neighboring countries can also contribute towards growth in the aviation sector. A country’s aviation policy is usually in close sync with its geopolitical priorities. In-line with India’s Neighborhood First policy, it’s crucial to enhance commerce and air connectivity first with the BIMSTEC countries, followed by the CIS nations. We should also strive to work towards a near term goal of flying to cities including Colombo, Dhaka, Chittagong, Katmandu, Yangon, and Kabul several times a day from each of our six metros. India’s regional trade with its neighbors places it among the lowest in the world, which is potentially an engine of economic growth and merits adequate attention
Airlines provide a low capital investment for nations to build and sustain their infrastructure proficiently and swiftly. Moreover, a strong aviation sector will create employment opportunities across a multitude of industries, while simultaneously integrating the country internally among its regions and externally with its neighbors.
As we enter 2021 with cautious optimism, there will be an enhanced focus on the health and safety of customers as well as employees at IndiGo. We will differentiate ourselves as a strong brand dedicated to providing hassle-free service, connectivity and on time performance. In addition, we will continuously permeate the strong feeling of enthusiasm of our employees for IndiGo into an enthusiastic loyalty of our customers. I believe that 2021 will be the year of recovery, and 2022 a year of robust growth.
(Ronojoy Dutta is wholetime director and CEO of IndiGo. Views are personal.