India is today the third largest aviation market in the world, only behind the United States and China. It is also the world’s fastest-growing aviation market.
The start of the Indian aviation industry
The Indian aviation story started in 1932 when its first airline, Tata Air Services founded by J.R.D Tata, was starting to operate. It later became Air India with the government taking a majority stake. In the 1950s the airline industry was nationalized by the government. This was the period of state-owned industry. It was in the 1990s when modern aviation, which we today see, actually started when the government opened the market. This started attracting private companies to set up their airlines.
Factors in favour
Being the fastest-growing aviation market, Indian aviation has grown by almost 10% in the last 10 years. There are several factors that could be attributed to this growth. The main reason for growth is due to the rising disposable income of the middle class. If we see the growth of per capita GDP for the last 10 years, it has grown from $1,400 to $2,100. Along with this, India has the largest youth population which has a greater desire and need to travel.
The boom
This growth cannot be supported without the right infrastructure. Over the past 9 years, the number of operational airports has drastically increased to 140 from the initial 74 airports. The government plans to operationalize 220 airports in the coming 5 years. The metro cities and busiest airports of Delhi and Mumbai will be getting second airports in the coming years.
Air India, in February 2023, made the historic deal of 470 new aircraft orders with Boeing and Airbus. This deal is worth $70 billion and is the largest deal in the industry. Soon, in June 2023, Indigo Airlines which is the largest airline company placed an order of 500 aircraft to Airbus. By 2035, both orders would be completely fulfilled and ready to fly.
The difficulties
Not all side is greener. Airlines is one of the toughest industries to be successful. In the past 29 years, 27 airlines have gone out of business or merged. Gofirst recently shut down its operation in 2023. There are strong reasons why this is a difficult space to operate. India is a cost-sensitive market. Most of the companies are hence low-cost carriers aiming to serve the majority of the market. But with more and more airlines entering the competition, the cost reduction game begins. With the affordable prices for the customers, airlines have to make sure to pay out the salaries, interests, fuel charges, aircraft leases, and other operational expenses. Fuel is the major cost and its rate keeps on changing.
Conclusion
All in all, the future of the Indian aviation industry is bright. But with the increase in the passengers, the increase in the aircraft, it has to be matched with a robust infrastructure. Despite the challenges faced, the industry will continue to thrive.
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