Why Indian carriers struggle to survive despite airport boom and record footfall

The Indian aviation industry may seem to be soaring, but it has a history of airline shutdowns due to money troubles, intense competition and management issues. For instance, Go First (formerly GoAir) filed for insolvency in 2023, struggling with cash flow and delayed engine supplies. Jet Airways, once India’s largest private airline, shut down in 2019 under a massive debt of Rs 18,000 crore. Although it tried to make a comeback, it’s now set for liquidation. Similarly, Kingfisher Airlines, owned by Vijay Mallya, folded in 2012 after debt issues worsened by Mallya’s legal troubles.

Air Deccan, India’s first low-cost airline made flying affordable when it launched in 2003. However, after being acquired by Kingfisher, it faced financial problems and eventually shut down in 2020 due to Covid-19’s economic impact.

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Regional carriers like Paramount Airways, Air Costa and Air Pegasus also couldn’t survive long, primarily because of financial struggles. Even early airlines like ModiLuft and Damania Airways, started in the 1990s, shut down quickly due to financial issues and conflicts with partners.

The full-service airline market has also shrunk. While Air India merged with Indian Airlines in 2007 to become the largest full-service airline, other major players like Kingfisher, Jet Airways and Air Sahara (renamed JetLite) all eventually collapsed. Recently, Vistara, jointly owned by Tata Group and Singapore Airlines, merged with Air India on November 12, 2024. This leaves Air India as the only full-service airline in India, marking the end of an era where multiple full-service options once thrived in the country.

With Vistara becoming part of Air India, the number of full-service carriers in the fast-growing Indian aviation space will shrink from five to just one in a span of over 17 years.

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Reality vs predictions

While the past and present of India’s aviation industry may seem challenging, the future looks bright. A study from October 2023 by the Confederation of Indian Industry predicts that by 2041, India will be among the world’s top three aviation markets, with the fleet size nearly four times larger than it was in 2019. Boeing’s 2023 outlook estimates that over the next 20 years, South Asia will add more than 2,700 new planes, with India alone receiving 90 per cent of these. This growth will require around 37,000 pilots and 38,000 mechanics, mainly in India, the Boeing study said.

As more people enter the middle class with higher disposable incomes, demand for both domestic and international flights is rising, prompting airlines to expand their fleets. This expansion benefits aircraft manufacturers, repair and maintenance services and related industries. E-commerce growth is driving demand for cargo planes, while India’s electronics manufacturing boom is increasing cargo needs. Government efforts to improve regional connectivity are also making air travel accessible to more people. Moreover, India’s push to become a global manufacturing hub is attracting investments in aerospace.

Domestic airlines carried 1,184.93 lakh passengers from January to September 2024, a 5 per cent rise from the previous year, per the Directorate General of Civil Aviation. According to Cirium’s 2024 Fleet Forecast, India’s passenger fleet is expected to grow from 720 planes in 2023 to more than 3,800 by 2043. Indian airlines are projected to represent 18 per cent of the Asia-Pacific region’s fleet by then, up from 8 per cent today, with an order book expected to reach 2,000 planes by March 2025.

Asia will continue leading global aviation growth, receiving 45 per cent of new aircraft, with China contributing 20 per cent, nearly matching North America. Over the next two decades, India’s fleet is expected to grow at 8.7 per cent annually, boosting its global share from 3 per cent to 8 per cent. However, despite rising passenger numbers, airlines have often struggled to translate them into profit making survival itself a key concern constantly.

No slowdown on airport development

Even as many airlines have shut down, India’s commitment to expanding aviation infrastructure has remained strong. On November 8, 2024, Prime Minister Narendra Modi announced plans for a new airport near Maharashtra’s Vadhavan Port—a Rs 76,220 crore project—during a BJP election campaign in Dhule. Originally proposed by former Chief Minister Devendra Fadnavis, Modi pledged that construction would start after elections, with the Centre collaborating with Maharashtra on project details. Approved in June 2024, Vadhavan Port will be India’s largest with the Jawaharlal Nehru Port Authority holding a 74 per cent stake.

According to a report in the Construction World, India’s aviation industry is undergoing a transformation, supported by a $11 billion government investment in new airports and upgrades, nearly doubling operational airports to 149 over the past decade. The UDAN scheme has boosted regional connectivity, opening air travel to smaller cities. By 2029, the industry is projected to reach a market value of $121 billion, with strong public and private investment. To meet future demand, over 2,800 new aircraft will be needed, the number of operational airports should rise to 200, and the total fleet to 2,000 planes. Addressing challenges like land scarcity and airport saturation will require an additional $40 billion investment by 2047. This sector’s growth is expected to generate around 350,000 direct aviation jobs in the future.

A hard look

While the announcement of new airports is a positive development for India’s aviation industry, there is also a concerning reality that cannot be overlooked. Despite the rapid growth of the sector, airlines face significant challenges. The cycle of debt, regulatory hurdles and fierce competition continue to create a tough operational environment for many carriers. Given these turbulences, maintaining profitability and sustainability is a major challenge for airlines, making it difficult to achieve the soaring revenue projections often suggested for India’s aviation future.