2020 is a very difficult year for the industry with passenger volumes and unprecedented losses. We are gradually moving towards recovery, but an accurate estimate of the exact shape of the revival of air traffic is difficult. Therefore, it is advisable to expand the time horizon a little and discuss the long-term perspective for Indian aviation.
India has an extraordinary story – a low growth journey as well as a high growth economy. India’s GDP is projected to grow anywhere between 6 and 8 per cent, a major portion of which is likely to come from the Indian middle class. However, India is one of the least penetrating markets for air travel, with only 5 per cent of citizens familiar with air travel. India’s diverse geography, internal migration and strong family ties, along with revenue growth, will lead to sharp growth in air travel in the coming years.
The aviation climate in India has been tough for years as one of the highest cost structures in the world due to high taxes and a steady cut in the rupee-dollar exchange rate. This puts constant upward pressure on fuel, maintenance and leasing costs. However, air fares in India are the lowest in the world. This high-cost, low-cost climate does not allow airlines to err, yet many are distracted by dreams and ambitions that are out of operational reality. There is a need to focus on costs and calibration expansion to survive in this environment. The government’s stance on high taxes may not change anytime soon, however, there is still hope that India’s growth story will eventually alleviate the problems posed by the gradually declining currency.
There is high optimism towards revenue. Although business traffic may have been in the back seat for some time at the time of posting the epidemic, the alternative to rail traffic to air traffic should be able to meet these volumes. Tier 1 cities are showing strong post-pandemic demand, driven mostly by SME and VFR traffic. In terms of international demand, we ate that it would continue to be an area of concern throughout the year and would recover slowly before that. As revenue levels slowly rise, so does the price of air tickets in India. Airlines fares do not have to be around levels in the developed world. It is enough for Indian airlines to reach fare brackets in countries like Thailand and Indonesia to exit from the hostile operating environment of the past.
India’s neighbors also contribute to the growth of the aviation sector. The country’s aviation policy is generally synchronized with its geopolitical priorities. In line with India’s neighborhood first policy, it is important to increase trade and air connectivity with BIMSTEC countries first, then the CIS countries. We must also strive for the goal of flying several times a day from our six metros to cities such as Colombo, Kaka, Chittagong, Kathmandu, Yangon, and Kabul. India’s regional trade with its neighbors is the lowest in the world, with the engine of economic growth and due diligence.
Airlines provide low capital investment for countries to build and maintain their infrastructure efficiently and rapidly. In addition, the strong aviation sector creates employment opportunities in many industries, while at the same time connecting the country internally with its regions and externally with its neighbors.
As we enter 2021 with careful optimism, there will be a better focus on the health and safety of employees as well as customers at Indigo. We distinguish ourselves as a strong brand dedicated to providing trouble-free service, connectivity and on-time performance. In addition, we constantly expand our employees’ strong sense of enthusiasm for Indigo with the enthusiastic loyalty of our customers. I believe 2021 is a year of renewal, and 2022 is a year of strong growth.
(Ronozoy Dutta is Indigo’s full-time director and CEO. Views are personal.