India’s Domestic Aviation: A Deep-Dive Into a Decade of Growth

This is the final blog post in a three-part series focused on India’s aviation market. In the previous two articles we provided an overview of India's aviation market and ambitions for the next decade, followed by a deep dive into their international intentions. In this article, we will now explore India’s domestic market and look at what the future holds for this fascinating market.

As the most populous country in the world, with over 1.4 billion people. India’s population is projected to peak at 1.7 billion in 2064, with 86,000 babies being born every day.

How does its domestic aviation market compare to other well-populated countries and how might it cope with the inevitable growth that is to come?

To provide insights into how India compares to other large domestic aviation markets, we will begin by exploring India, USA, China, Brazil and Indonesia.

Looking back to 10 years ago India was the smallest market with 8m seats, followed by Indonesia in 4th and Brazil in 3rd place, and USA and China occupying the top two positions.

Today, the USA and China remain the largest domestic aviation markets. However, India is surpassing the Brazilian and Indonesian domestic markets to become the third-largest domestic market with airline capacity of 15.6m seats in April 2024.

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Over the last ten years domestic airline capacity has almost doubled in India and has seen an annual growth rate of 6.9% between 2014 and 2024. India is the fastest growing market across all five domestic markets we considered. China was close behind with annual growth of 6.3% between 2014 and 2024, and there is a much smaller growth rate in the USA and Indonesia. And the Brazilian market saw an annual decline overall within the period of -0.8%, although it has grown in the last 5 years from 9.3m seats in April 2019 to 9.8m in April 2024. 

Another interesting metric to consider across these large domestic markets is low-cost carrier (LCC) capacity share. In April 2024, LCCs accounted for 78.4% of domestic airline capacity in India, the highest LCC share of any of these five domestic markets. Followed by Indonesia with LCCs accounting for 68.4% of domestic capacity and Brazil with 62.4% LCC capacity share. The markets with the lowest share of LCC capacity in this set of countries are the USA with 36.7% LCC share and China with only 13.2%.

Indian aviation growth driven by LCCs

The LCC sector has been key to driving growth in India’s domestic market. In the last 10 years IndiGo has almost doubled their market share, from 32% of capacity in 2014 to 62% today. Whilst the rest of the market has barely grown, averaging just 0.7% a year, IndiGo has a domestic capacity growth rate of 13.9% annually. 

Air India (including Air India Express and Vistara) is the next largest carrier in the domestic market, and account for 28% of capacity. This means that India’s two largest carriers account for 9 out of 10 airline seats. While both carriers are keen to pursue more growth internationally, they have substantial aircraft orders for narrowbodies.

According to ch-aviation, the airlines have the following % of narrowbody aircraft on order:

  • 96% of IndiGo’s 982 aircraft on order
  • 77% of the Air India groups 447 aircraft

Whilst both carriers have indicated they intend to focus on developing international connectivity from India, it is inevitable that some of the narrowbodies on order will be used in the domestic market, meaning there will be plenty of scope for growth to continue.

India’s airlines seem well placed therefore to facilitate growth, but is there adequate airport capacity to handle it?

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India’s airport system – can it deliver?

The scale of the challenge for Indian airports is clear when compared with the other large domestic markets. A high level comparison (notwithstanding the different geographies) shows:

  • India is lagging with just 119 airports currently offering domestic services
  • China, with a similarly sized population, has twice as many with 250 domestic airports
  • USA has 656, just over 2.5 times more than China. 

India’s ten largest airports account for more than two-thirds of the country’s domestic capacity. Delhi is by far the biggest, with over 5.2m seats in April 2024, accounting for 17% of all domestic seats. Mumbai is next largest, with 3.7m seats, and 12% of the country’s domestic capacity. 

One of the big challenges for the Indian aviation market has been to ensure there is enough connectivity across the country and the UDAN scheme which was implemented in 2017 had the aim of making air travel accessible to all, even those in remote parts of the country. If one of the measures of success of the UDAN scheme is the number of routes served in the domestic market, then there certainly has been progress – from 215 in April 2014, to 540 in April 2024. 

Indian Domestic Airline Routes - Then and Now

Indian-Domestic-Airline-Routes

Source: OAG

So connectivity has improved, but to unlock the next phase of India’s domestic market development, the issue of ensuring there is enough airport infrastructure is at the forefront. Figures recently presented by IndiGo in March 2024 projected that middle-class households are set to nearly double from 158m to 300m in the 12-year period from 2018 to 2030. This increase in wealth in the population is expected to deliver high levels of passenger growth. In the same presentation IndiGo forecast that Indian domestic passengers were projected to more than double from 155m in 2024 to 350m in 2030. It’s clear that India will need bigger (and more) airports to handle all of this projected demand.

There are plans for an investment of USD11 billion over the next five years to increase the number of airports in India to 200. Some of this will be funded by the Indian government, but there is increasingly private investment taking place. The Adani Group, an Indian multinational conglomerate company, intends to invest USD 7.2 billion in airport expansion across the eight airports the company operate in India, which includes the new Navi Mumbai airport which is expected to be operational in 2025. Once fully developed, this will provide capacity for an additional 90 million passengers annually.

Construction of another airport to serve the Delhi metropolitan area is underway with capacity for up to 70 million passengers, and the new Jewar Noida Airport is expected to open later this year. A further challenge will be ensuring that growth in the supporting infrastructure such as access roads and surface transport links matches pace with the planned airport developments.

India’s domestic passenger numbers are set to increase significantly in the coming years given the expected growth of the middle class and whilst airlines have put in place the long-term aircraft orders to support this growth, the key question is whether the current planned investment in airport infrastructure will keep pace and deliver what will be required.

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