The Indian airline sector’s monthly data shows that passenger growth in October 2024 was 8 per cent year-on-year (YoY). However, this underlines the metrics of a fragile industry grappling with structural inefficiencies, market concentration, and wavering passenger satisfaction.
Indigo’s commanding market share of 63.3 per cent is less a triumph of market dynamics and more a stark reminder of the industry’s monopolistic tendencies. Alongside the Tata Group, which holds a combined 28.5 per cent share, these two players now control 92 per cent of India’s domestic skies. This duopoly stifles competition, leaving smaller carriers like SpiceJet and Akasa Air with marginal room to manoeuvre.
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SpiceJet’s modest gains – a 40-basis point increase to 2.4 per cent – are touted as a turnaround. However, with the airline recording the highest cancellation rate at 1.91 per cent, questions about its operational reliability remain unresolved. Similarly, despite being a fresh entrant, Akasa Air’s slow growth trajectory underscores the challenges of breaking into a sector dominated by behemoths, as per Emkay Research.
Fall in airlines’ load factors
The load factors, a critical measure of how efficiently airlines fill seats, reveal significant inefficiencies. Despite its market dominance, IndiGo saw its PLF dip to 82.3 per cent. The Tata Group’s airlines fared no better, with Vistara, often praised for its premium positioning, witnessing a steep fall in PLF to 86.1 per cent from 90.9 per cent in September. These declines highlight an inability to capitalise fully on available capacity, even during a seasonally-strong period.
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More alarmingly, the inconsistency across players points to a sector-wide struggle to align supply with demand. This is especially troubling given that October traditionally benefits from festive travel surges, suggesting deeper operational or strategic flaws.
On-time performance: A persistent ache
Operational efficiency, as measured by on-time performance (OTP), continues to be a thorn in the industry’s side. While Indigo leads with a 71.9 per cent OTP, this is hardly a figure to boast about. Major players like Air India (66.3 per cent) and Akasa Air (67.2 per cent) lag significantly, raising questions about their ability to deliver reliable service.
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SpiceJet’s dramatic improvement in OTP, from 30.4 per cent to 63.8 per cent, is less a sign of progress and more a recovery from abysmal lows. Meanwhile, the persistent gap in punctuality across airlines indicates systemic inefficiencies, from infrastructure bottlenecks at airports to scheduling mismanagement.
Fuel prices: A ticking time bomb
Another cause for concern is the industry’s overreliance on stable fuel prices as a buffer for profitability. November saw a marginal 3 per cent month-on-month increase in aviation turbine fuel (ATF) prices, with further hikes expected. While the current Brent crude price of $75 per barrel offers a semblance of relief, this stability is far from guaranteed. Any significant spike could derail the already-thin profit margins, particularly for smaller carriers.
Missing the passenger-centric approach
Amid the focus on market shares and operational metrics, the industry has sidelined passenger experience. High cancellations, mediocre punctuality, and uneven service levels paint a picture of an industry failing its most important stakeholder – the traveller.
Moreover, with Indigo and Tata Group airlines dominating, passengers have fewer choices, often compromising service quality due to a lack of alternatives. The absence of competitive pricing and innovation further compounds this issue.
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While growing in numbers, the Indian aviation industry risks becoming a cautionary tale of unchecked consolidation and operational complacency. While struggling, smaller players like SpiceJet and Akasa Air are essential for maintaining a competitive balance. Yet their survival is only possible with significant reforms.
For the sector to thrive sustainably, regulators and stakeholders must address fundamental issues: fostering competition, incentivising efficiency, and prioritising passenger-centric policies. Without such measures, the industry risks flying into a storm of its own making, where growth in passenger numbers masks a more profound turbulence.
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