K Srinivasan
On November 17, 2024, India’s aviation sector recorded a new high with over five lakh passengers having taken to the skies. As Hindustan Times contributor Ameya Joshi reported, “With airlines carrying over 5 lakh domestic passengers in a single day, for the first time in the history. All airlines together carried 5,05,412 domestic passengers across 3173 domestic departures.”
The figure tells you two things. Firstly, growth in the Indian aviation market will be a year-on-year process that is unlikely to abate (barring a black swan event) for the next two decades. Secondly, it also helps map out the potential that waits to be tapped. Imagine, only five lakh-plus flying in a country of 1.4 billion people! It tells you how large the market is and the fact that we haven’t scratched the surface in terms of numbers. And it is even more evident when you contrast it with the most mature aviation market in the world. The US aviation sees over 45,000 flights and 2.9 million passengers every day with a population base of 340 million.
Stray roadblocks
But there will be the occasional roadblocks and turbulence that will impact aviation in the near term as the latest ICRA report lays out. It ‘’expects the Indian aviation industry to report a net loss of Rs. 20-30 billion (Rs 2,000-3,000 crore) in FY2025 and FY2026 compared to a net profit of Rs. 16 billion (Rs 1,600 crore) in FY2024 due to anticipated pressure on yields as airlines strive to maintain adequate PLF (Passenger Load Factor) amid continued elevated ATF prices. Further, the higher borrowing costs due to increased lease liabilities with the scheduled aircraft deliveries for select airlines are likely to increase the interest burden. Nonetheless, the expected losses are significantly lower than losses of Rs. 235 billion (Rs 23,500 crore) logged in fiscal 2022 and Rs 174 billion (Rs 17,400 crore) reported in FY2022 and FY2023, respectively.’’
The ICRA report came just hours after the Directorate General of Civil Aviation said that domestic air passenger traffic had risen to 1.43 crore passengers in November 2024, up 11.9 per cent as compared to 1.27 crore passengers for the same period last year. The footfall also increased in October and there has been a steady rise in the numbers. However, ICRA has cautioned that the growth is likely to taper to 7-10 per cent in fiscal 2025.
Reforms needed
My view is that the numbers will not diminish but increase. Two major airports will be ready for passengers next year – Navi Mumbai and Jewar. Add to that several other new terminals and upgrades and the projected growth of the Indian economy at 6.5 per cent. Hopefully, ATF prices will stabilise, and the world be a lot more peaceful this year. But as these numbers grow, it will be critical for the Government to sort out issues like pilot shortage, safety concerns, weak regulatory oversight and a massive human resource shortfall that have been a consistent source of friction for the last two decades. If India has to be truly a world-class aviation market, more reforms are urgently required to keep up with the GDP growth.
