Will the Indian aviation sector capitalise on its momentum in 2023?
It has been a jolty ride for the global aviation industry through the last couple of years with only the second half of 2022 making it seem like an onset of a comeback. The Indian aviation industry is on a high-growth trajectory and is witnessing a solid revival after pandemic-related turbulence. With more flyers, more airlines, and more airports, India is set for an aviation boom. Also, with many developments in civil aviation in the country, things are certainly looking up for the sector.
The global aviation industry in 2022 fared a mixed bag of experiences with the second half of the year being more responsive than the first. While the industry has seen an unprecedented comeback from COVID-19, the industry is still far from profitability. Just when it looked like COVID-19 was starting to wear off, the Russo-Ukrainian war pummeled another blow to the aviation industry, causing power shortages, inflation, industrial unrest, and raised fuel prices.
The economic and geopolitical environment presents several risks to the outlook for 2023 in the global airline industry. While there may be a potential easing of aggressive interest rate hikes in early 2023, there is still a risk of some economies falling into recession, which could impact demand for both passenger and cargo services. However, a potential recession could be partially mitigated by lower oil prices. The outlook for 2023 anticipates a gradual reopening of China to international traffic and an easing of domestic COVID-19 restrictions, but a prolongation of China’s zero COVID policies would have negative effects. Additionally, proposals for increased infrastructure charges or taxes to support sustainability efforts could potentially impact profitability in 2023.
India’s domestic passenger traffic experiences 52 per cent increase from January to November 2022
After experiencing a dip in passenger volume due to the COVID-19 pandemic, the aviation industry in India saw an increase in travellers in 2021 and 2022. According to data from the Directorate General of
Civil Aviation (DGCA), the industry saw 1441.71 lakh domestic travellers in 2019. However, the pandemic led to a decrease in travel, resulting in passenger volume dropping to 630.11 lakh in 2020. While the numbers improved slightly to 838.14 and 1105.1 lakh in 2021 and 2022, respectively, they still remain lower compared to pre-pandemic levels. In 2022, there was a gradual increase in the number of domestic passengers in the aviation industry in India.
Domestic aviation operations soaring high, sets new records in December 2022
The aviation industry in India saw a high volume of domestic travellers in November, with 116.7 lakh flyers, the most in any month of the year. The lowest volume occurred in January, with only 64.08 lakh travellers. In December 2022, the monthly domestic air passenger traffic reached 1.29 crore, surpassing the pre-pandemic level of 1.26 crore in December 2019. Jyotiraditya Scindia, Civil Aviation Minister, India, described this trend as “healthy” and a positive sign for the industry. Scindia recently shared on Twitter that December 2022 set a new record for air passenger movement, with the traffic reaching 1.29 crore. The minister stated that there is a “healthy trend” in the domestic passenger movement recently, which is a “good sign” for the aviation sector. The monthly domestic passenger numbers in December 2022 exceeded the pre-COVID high.
Is 2023 a beacon of hope or an illusion of progress?
As per CAPA’s Advisory Research and Analysis, Indian airlines are expected to report a loss of approximately USD 3B (after adjustments) for FY 2022. While there was a great inflow of air passengers in the second half of the year, the momentum is bound to flow in 2023.
The comeback in 2023 will come with a caveat. While the demand for air travel is steadily increasing, the global bigwigs project every take-off as a death blow to global sustainability plans. If the industry steps forward strategically, 2023 is the year that can finally help the industry fly through the clouds to see some sunshine.
As per the Ministry of Civil Aviation’s report, the number of operational airports has nearly doubled, from 74 in 2014 to 141 at present. The government wishes to continue building more airports and expects to have 220 operational airports by 2027. This 60 per cent growth in the number of airports is set to place India alongside China, which already has 248 operational airports. CAPA, in its report, also mentioned China being replaced by other emerging countries in the Asia-Pacific region like India, Indonesia, Vietnam, and the Philippines.
The airline industry is expected to become profitable in 2023, with global net profits projected at $4.7 billion on $779 billion in revenues (0.6 per cent net margin). This expected improvement comes despite economic uncertainty and slowing global GDP growth (1.3 per cent in 2023 compared to 2.9 per cent in 2022). Factors such as lower oil price inflation and continued pentup demand may help to keep costs under control, but thin margins make it important for the industry to be vigilant and flexible in the face of potential shifts in variables. In a recent statement, Willie Walsh, the
Director General of the International Air Transport Association (IATA), advised, “vigilance and flexibility will be key.”
The civil aviation industry in India has emerged as one of the fastest-growing industries in the country during the last three years. According to a report, India has become the third-largest domestic aviation market in the world. The major events shaping up the future of the Indian aviation industry are:
Air India returns to the Tata Group
Air India, the national flag carrier of India, has returned to the Tata Group following a two-year privatisation process. The airline, which was founded by JRD Tata in 1932, has undergone rapid changes since its privatisation in January 2022, including the appointment of a permanent CEO, Campbell Wilson, and improvements to the passenger experience. Air India has announced plans to add 42 planes in 2023, including 11 Boeing 777s and 31 Airbus A320neos, as part of its expansion efforts to become a central competitor in the Indian market and achieve a 30 per cent domestic market share. The airline aims to triple its fleet and improve the passenger experience as part of its five-year “Vihaan. ai” vision.
National flag carrier Air India, returned to the Tata Group after a nearly 69-year absence. Since the takeover, the new management has been working to address various legacy issues in order to restore the airline to its former glory. The Tata Group has plans for expansion and has made some significant decisions, including gaining approval from the Competition Commission of India for the merger of AirAsia India with Air India and signing an agreement with Singapore Airlines to merge Vistara with Air India, keeping Singapore Airlines as an equity partner in the resulting entity.
In a recent press release, the airline unveiled its transformation plan, banking its hopes on the success of Vihaan.AI. Air India has established a thorough roadmap with distinct milestones that is focused on dramatically expanding both its network and fleet, creating a completely redesigned customer proposition, enhancing dependability and on-time performance, and assuming a leadership role in technology, sustainability, and innovation while making aggressive investments in the best available talent.
In the next five years, Air India plans to considerably expand its international routes while attempting to improve its domestic market share to at least 30 per cent. The strategy aims to place Air India on a path to consistent development, financial success, and market dominance.
Commenting on Vihaan.AI, Campbell Wilson, MD, and CEO, Air India, said, “This is the beginning of a historic transformation for Air India and the dawn of a new era. We are laying the foundation for a brave new Air India, with a renewed sense of purpose and incredible momentum. Vihaan.AI is our transformation plan to make Air India the world-class airline it once was, and it deserves to be again. We are focused on being recognised as a world-class airline serving global customers, with a proudly Indian heart.”
Vistara expanding its network and fleet going forward in 2023
Vistara has been on an expansion spree for the past couple of years and has grown its operations to 31 domestic and 12 international destinations.
This relentless expansion is not limited to the destinations. They also look to add a whole new lot of aircraft to their extensively vast fleet. Speaking to Travel Trade Journal about their expansion plans, Deepak Rajawat, Chief Commercial Officer, Vistara, shared with us, “Currently, Vistara has a fleet of 54 aircraft that comprises 41 Airbus A320neo, 5 Boeing 737-800NG, 5 Airbus A321neo and 3 Boeing B787-9 Dreamliner, and we aim to reach a fleet size of 70 by the end of 2023. With new aircraft joining our fleet progressively, we have been steadily densifying our domestic as well as international network.”
Speaking of the plans for 2023 and the extensive network of destinations Vistara flies to, Rajawat added, “This year, we added Jeddah, Abu Dhabi, and Muscat to our international network, and also started flights to/from Coimbatore and Jaipur. We are continuously monitoring opportunities to expand our network and several factors such as demand on the route, bilateral relations, availability of slots, etc., come into play when entering new markets. We will continue to steadily expand and build our footprint across the globe to ensure uninterrupted connectivity to our customers.”
The COVID-19 wave has birthed a lot of new characteristics in the aviation industry. With newly introduced hygiene protocols and contactless check-ins to entire airports being built with the pandemic restrictions in mind. Vistara too seems to have made efforts to take this paradigm shift into account for their strategy in 2023. Revealing the trends Vistara predicts for 2023, Rajawat shared, “There has been rapid adoption of touchless and paperless technologies, and the industry has effectively accelerated its digital transformation process. Today, people are increasingly opting for online, self-service tools for end-toend transactions, including the booking of ancillary services, etc. There has also been a noticeable increase in preference for non-stop flights to avoid any transit points, especially on long-haul routes. Most of these trends that have emerged in the past few years, especially during the pandemic, have gained immense prominence and will continue to remain so.”
The changes induced by unparalleled circumstances, coupled with some traditional marketing strategies, make up a whole of Vistara’s marketing strategy for 2023. While they are catering to the new normal passengers on their flights, they also look to reward their frequent flyers with their loyalty programs. Rajawat shared, “Club Vistara, our exclusive loyalty program, has recently launched Club Vistara Escapades, a perennial program designed to offer CV members, across all tiers, exclusively curated getaways and immersive experiences. The all-expense paid getaways can be won through Instagram contests or raffle draws on our social media channels. We are continuously exploring partnerships with various other travel and lifestyle entities under Club Vistara to offer an exclusive range of benefits to our frequent flyers.”
Indigo Airlines reflects on past accomplishments and announces new goals
One of India’s most esteemed airlines, Indigo, took some noteworthy actions this year despite the ongoing pandemic. Indigo was the only airline to generate profits as well as a surplus of cash. This year, it also initiated operations to seven domestic and international destinations and its cargo operations.
There have been evident signs of recovery in the aviation industry as the demand for air travel has significantly increased. On one side of the coin, there is a lot of potency in the aviation industry recovery claims. On the other hand, the undercurrent of a lingering pandemic, geopolitical issues, rising fuel prices, and supply issues cannot be discounted and might still have the airline investors toss and turn in their sleep.
While signaling strong numbers, Indigo in their year-end statement shared, “We are currently operating more than 1600 daily flights, our highest ever. In addition, we have been strengthening connectivity across the network with 76 domestic and 26 international destinations.” Along with expanding its network and connectivity, Indigo looks to improve its operational efficiency. Indigo also looks to introduce a host of technologypowered initiatives going forward in 2023.
Introducing Akasa Air: India’s latest airline
India recently welcomed its newest airline, Akasa Air, as the aviation industry began to recover from a difficult period. Founded by former Jet Airways CEO Vinay Dube
and supported by renowned investor Rakesh Jhunjhunwala (who unfortunately passed away shortly after the inaugural flight), Akasa aims to utilise an ultra-low-cost strategy and benefit from the increasing air traffic in the country.
In a recent development, India’s newest airline introduced its in-flight safety manual in Braille for individuals with visual impairments. In line with the company’s value of empathy and providing a consistent experience for all customers, the Braille manual provides safety instructions in English and Hindi.
In November 2021, Akasa made a significant impact with its order for 72 Boeing 737 MAX aircraft, 11 of which are already in the fleet. As the second MAX operator in India and the only one currently receiving deliveries, Akasa hopes to emulate the success of market leader IndiGo, which employed a similar approach with the Airbus A320 in 2005.
Since its debut in August, Akasa has expanded to serve 13 destinations in India and plans to go international in 2023 with the delivery of 20 more aircraft. The carrier intends to grow by linking smaller cities to major hubs and gradually expanding across busier routes. The airline will begin offering daily flights between Hyderabad and Bengaluru, as well as between Hyderabad and Goa, starting on January 25, 2023.
With a seemingly bright future ahead of Akasa, the new entrant plans to expand its presence throughout India by adding more cities to its network, with a focus on connecting metro areas to tier 2 and tier 3 cities. The airline plans to increase its fleet size by adding one new aircraft every 15 days. By the end of March 2023, the fleet will consist of 18 aircraft, and over the next four years, an additional 54 aircraft will be added, bringing the total fleet size to 72 aircraft.
Jet Airways aiming to re-enter Indian skies
Once India’s biggest private carrier, Jet stopped flying in April 2019 after running out of cash and was taken to a bankruptcy court. A consortium of London-based Kalrock Capital and UAE businessman Murari Lal Jalan planned to infuse close to `1,000 crore in the defunct Jet Airways and also be willing to give collateral. However, currently, the creditors of Jet Airways and the company’s new owners are deadlocked over a resolution plan to pull the airline out of bankruptcy, putting the carrier’s future in limbo.
Indian airspace garnering attention
The world over, as airlines are turning profitable, repaying their loans, and looking at adding capacity and network if 2022 was action-packed, 2023 may be even more so. With promising developments in the aviation sector of the country, foreign and domestic aviation companies are fighting for a pie of the Indian sky.
India-Italy connection strengthened with launch of nonstop flights from New Delhi to Rome
ITA Airways has entered into an agreement with the IndoItalian Chamber of Commerce and Industry (IICCI) to offer discounted fares for employees of IICCI member companies travelling between India and Italy.
The direct flight will allow passengers from India to easily access not only Italy but also other destinations in Europe, the Mediterranean, South and North America through connections at ITA Airways’ Rome Fiumicino hub.
The partnership aims to improve relations between the two countries and increase trade and investment. This will be supported by the launch of a direct flight from New Delhi to Rome, which began operations three times a week, starting on December 4, 2022. The flight will depart from New Delhi’s Indira Gandhi International Airport at 3:50 am and arrive in Rome at 8:10 am, with the return flight departing from Rome at 2:10 pm and arriving in New Delhi the following day at 2:00 am local time.
ITA Airways entered India market for the first time and will be the only airline to offer a direct flight between Rome Fiumicino and New Delhi. On December 30, 2022, ITA Airways announced that it has added an additional weekly frequency to its direct flights from Rome to New Delhi, and vice versa. This means that there will now be four flights per week, instead of three, available for travel in March, April, and May 2023. The additional flight will operate on Sundays from Rome and on Mondays from New Delhi.
Virgin Atlantic introduces A330neo to contribute to sustainable travel
Terming 2022, as the ‘year of recovery,’ Alex McEwan, Country Manager – South Asia, Virgin Atlantic shared, “In India, 2022 was our biggest year ever, with three direct daily services from India to the UK (two from Delhi and one from Mumbai) as well as the launch of our codeshare partnership with India’s largest airline, IndiGo.”
Owing to India’s rapid economic growth, McEwan expects 2023 to continue the growth hinted at by the second half of 2022. He said, “We have had a strong summer with relatively few travel restrictions, but that one summer alone is not enough to recapture all the demand that was lost during two years of restrictions, so we can expect continued high demand. This will be particularly true for India, which seems to be bucking the global trend with strong economic growth forecasts.”
If the pandemic and a subsequent war were not enough to diminish the aviation industry’s sales, the sustainability issues concerning the industry’s carbon emissions prove to be the third nail in the coffin. To tackle this Virgin Atlantic recently introduced A330neos to their fleet, McEwan further added to this by saying, “We will induct 16 of these next-generation aircraft across the next five years. The A330neo will be a huge contributor towards our ambitious target of net zero emissions by 2050. Through multi-billion-dollar fleet investments in recent years, we now have one of the greenest and youngest fleets in the sky, with an average of just six years. This compares favorably to many of our peers. Not only is this better for the environment, but it also means customers can feel confident that when they fly Virgin Atlantic, they will experience the very best aircraft technology and inflight service on offer.”
Virgin seeks a lot of support from its travel partners, agencies, and co-airlines to spread its message of their plans on spreading awareness around Indigo and Virgin’s codeshare in the year 2023, “The customers can connect from 15 points in India onto our flights from Delhi and Mumbai to London. Travellers have so many options when connecting between IndiGo and Virgin Atlantic, and can also take advantage of our seamless connections at Heathrow onto more than 200 destinations in the USA alongside our partner Delta Airlines,” McEwan added.
While 2023 seems like a year filled with opportunities, the situation seems not as easy as it looks on the surface. Like every other airline, Virgin Atlantic has to deal with the weakening euro and sky-high jet fuel prices.
VietJet’s notable expansion in India
During the first nine months of 2022, there was a significant increase in the number of flights and passengers compared to the previous year. Specifically, there was a 150 per cent increase in the number of flights and a 225 per cent increase in the number of passengers. In total, there were 87.7 thousand flights and 15.4 million passengers.
There was an increase of 31 per cent in the number of Indian tourists compared to the previous month, and a more than 50 per cent increase compared to the same period in the previous year. A total of 109,000 Indians visited Vietnam in the first 11 months of 2022, making India one of the top 10 markets for inbound tourists to Vietnam.
In a recent development, VietJet has added a new route connecting Ahmedabad, India to Da Nang, Vietnam and will operate flights on this route on Tuesdays, Thursdays, Saturdays, and Sundays. This expansion of VietJet’s flight network between India and Vietnam will provide Indian travellers with more convenient and affordable travel options.