Indian airlines poised to capture 50% of country's international travel mkt

The improvement would be driven by Indian airlines deploying additional aircraft and adding new routes in the international segment

  Indian airlines are set to soar in the international market, capturing a significant share of passenger traffic in the coming years, according to a new report by CRISIL Ratings.

The report predicts that by fiscal year 2028 (FY28), Indian carriers will hold nearly half (50%) of the Indian international passenger traffic market, a substantial increase from their current share of 43% (FY24).

This significant rise is attributed to several factors, including:

Fleet expansion and new routes: Indian airlines are strategically adding new aircraft to their fleets and launching new international routes, providing more options for travelers.
 

Direct flights: Passengers can now enjoy the convenience of direct flights to key international destinations, eliminating layovers and reducing travel time.
 

 

Domestic connectivity advantage: Indian airlines boast a wider domestic network compared to foreign competitors. This allows them to offer seamless connections for travelers from smaller Indian cities to international destinations on a single ticket.
 

Strategic location: India's geographical position makes it a potential hub for connecting passengers between Europe, the Middle East, and Africa (EMEA) with the Asia Pacific region.

India’s international passenger traffic grew to around 70 million in fiscal 2024, from a low of 10 million in pandemic-hit fiscal 2021, to surpass the pre-pandemic level of  67 million passengers in fiscal 2020. The share of Indian airlines, which was rising steadily earlier, picked up pace since the pandemic.

Surge in internation traffic decoded 

The report highlights a growing trend in international leisure travel by Indians, fueled by factors like rising disposable incomes, simpler visa processes, and an increasing number of operational airports. This surge in international passenger traffic, estimated at a Compound Annual Growth Rate (CAGR) of 10-11% over the next four years, presents a lucrative opportunity for Indian airlines. 
 

"A noticeable shift in spending patterns has emerged after the pandemic, as evident in the increasing inclination of Indians towards international leisure travel. Increasing disposable incomes, easing visa requirements, growing number of

airports and enhanced air travel connectivity are boosting international travel. The government’s focus on making India a hub for tourism is also expected to provide a fillip to inbound traffic. Thus, international passenger traffic is likely to clock a CAGR2 of 10-11% over the next four fiscals, against a mere 5% CAGR in the four years prior to the pandemic," said Manish Gupta, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings.

Indian airlines are looking to capture a large portion of the growth in international passenger traffic as it is typically more profitable due to higher yields and has less intense competition compared with domestic routes. They have

added 55 new international routes over the past 15 months, taking their tally beyond 3004. These include direct flights originating from additional cities to popular long-haul destinations in the United States, Europe and Australia, effectively reducing flying time and eliminating layovers.

Indian airlines are also aiming to deploy additional aircraft on the short- and medium-haul international routes and leveraging codeshare agreements with major global airlines to offer onward connectivity to passengers.

“To capitalise on the growth in international travel, Indian airlines are investing in widebody and long-range narrowbody aircraft for network expansion, adding new international routes and introducing long-haul non-stop flights to key destinations. Aided by the planned fleet addition and network expansion strategy, Indian airlines could log a CAGR of 14-15% in the international segment over the next four fiscals, taking their market share to 50%," said Ankit Kedia, Director, CRISIL Ratings.

The growth in domestic traffic is expected at 10-11% over the same period. Faster growth in the more profitable international segment will strengthen the business profiles of Indian airlines. That said, an economic slowdown impacting discretionary air travel and higher-than-expected competition from foreign airlines can delay the gain in market share by Indian airlines and, thus, will bear watching.

"As such, Indian airlines have certain natural advantages in cornering a larger share of the country’s international traffic compared with foreign airlines. They have superior domestic connectivity than their overseas counterparts – which serve only select Indian cities – and can offer end-to-end international connectivity on a single ticket to travellers from Tier 2 and Tier 3 cities," noted the report.