The aviation boom in India: what will it mean for you when you fly?

They also promise to bring hundreds of millions more people, most of whom have never flown before.

But, ironically, the fierce competition also means that the same airlines that started this revolution could be among the last ones to take advantage of it.

Mega orders powered by unquenchable demand

Budget carriers now account for 70% of India's domestic aviation market.

MANJUNATH KIRAN / AFP / AFP / Getty Images

To better understand the current paradoxical state of the Indian aviation industry, one has to go back a few years.

In 2014, IndiGo, a relatively inexpensive and relatively young Indian airline, made headlines by ordering 250 Airbus A320s at one time, representing a $ 26.5 billion purchase at list price.

Following an earlier order for 100 aircraft of the same type, it was at the time the largest aircraft order ever received by the European aircraft manufacturer.

While these figures may have seemed fascinating at the time, demand has caught up after four years of double-digit growth in the commercial aviation industry in India, and IndiGo is already moving to bigger planes.

In late 2018, the carrier announced that it was converting 125 aircraft from its A320 order to the A321neo type, a larger aircraft that could accommodate 220 passengers instead of the 189 from the A320.

These mega-orders of aircraft are not unique, but reflect a broader trend.

In July 2016, the low-cost carrier GoAir doubled the size of a previous aircraft order from the new Airbus A320neo to 144. Spicejet ordered 205 models of the Boeing 737 MAX.

Indian airlines have close to 1,000 outstanding aircraft orders. To put this figure in context, there are currently about 700 airliners in India.

Two decades of wonder

The Indian airline Spicejet is one of many low-cost carriers that have placed large orders for aircraft in recent years.

Bloomberg / Bloomberg / Bloomberg via Getty Images

So, what does all this mean for travelers?

Basically, cheap domestic flights and many routes, making it easier than ever to explore India, including destinations once considered too far away for a quick vacation.

Low cost airlines now account for 70% of the domestic market and, according to the International Air Transport Organization (IATA), the average domestic fare in India now costs less than a third of what it reported in 2005.

Over the last 20 years, the Indian airline industry as a whole has multiplied by eight the number of passengers it carries.

Performance in the low-cost segment is even more impressive: it has increased 27-fold since its inception (the first Indian low-cost carrier, the now-defunct Air Deccan, launched in 2003).

The end of the party is nowhere in sight.

"India still has the lowest air transport penetration rate among the top 20 airlines in the world and is even lower than other emerging markets," says Binit Somaia, director of the airline's CAPA aviation consultancy for South Asia.

"If you look at the domestic capacity, the annual number of seats available per capita, it is also well below other major economies.If the number of seats in India is about 0.1, similar figures for the China and the United States are 0.4 and 2.6, respectively, more growth. "

Indeed, IATA predicts that the number of air travel to India will increase more than triple over the next two decades, from 160 million to 520 million a year by 2037.

Even at their lowest end, IATA traffic estimates predict that India will become the third largest air transport market in the world (after the United States and China). here a generation.

Looking at the flow of passengers, this may have already happened.

Anand Stanley, President and CEO of Airbus India & South Asia, shares this optimism about the long-term prospects of India's air travel market.

"The 8.1 billion train journeys a year in India could be converted into more than one billion air travel," he said.

"This represents tremendous growth opportunities for the sector, and we expect the number of devices required to approach 2,000 over the next 20 years."

That airlines benefit as much as travelers and aircraft builders from this next capacity increase is however a totally different issue.

Feel the pinch

The flight attendants of the Vistara pose aboard an Airbus A320neo during an event organized at the Indira Gandhi International Airport in New Delhi on 1 September 2018.

CHANDAN KHANNA / AFP / AFP / Getty Images

Of the major Indian airlines, only two, IndiGo and GoAir, have managed to remain consistently profitable in recent years. A third, SpiceJet had a more mixed performance, although it seems to be going in a positive direction.

However, a few difficult quarters in 2018 mean that even these budget carriers are not sure of making a profit by the end of the current fiscal year.

Low-cost and lean companies, however, seem better able to adapt to a competitive environment that keeps ticket prices low and makes it difficult to offset cost increases such as fuel.

On the other hand, full service carriers are struggling.

Air India, a public company, has long been a burden on public finances. Bureaucracy and high costs are often blamed for its failures. His finances would be so embarrassing that a recent privatization attempt was canceled due to lack of potential buyers.

Jet Airways, a full-service private carrier and India's second-largest airline, has consistently suffered losses over the last decade, resulting in its collapse this month. A merger with Etihad Airways of Abu Dhabi, which bought 24% of its capital, was not enough to pull it out of the red.

It meets the same fate as Kingfisher Airlines, a famous brand and the second largest Indian airline. Owned by flamboyant beer mogul Vijay Mallya, she collapsed in 2012, alongside the rest of her owner's trading empire.

The size of the Indian aviation market however continues to attract new entrants.

Air Asia and Singapore Airlines have both established separate joint ventures with the Indian industrial conglomerate Tata Sons. The result was the launch of two new airlines: AirAsia India, which follows the low-cost model of the other carriers of the AirAsia Group and Vistara, a full-service carrier with a more upscale positioning.

The internal market remains at the center

Until now, these newly created airlines were limited to the domestic market. This is about to change as airlines reach the minimum fleet size threshold set by the Indian government to grant access to international routes.

But it is also interesting to note that the domestic market is larger and is growing faster so far.

With much to do to provide air connectivity to small Indian cities, the government is fine-tuning regulations and offering flight subsidies to stimulate the market.

Airlines have so far responded by adding small turboprop aircraft to their fleets.

But can India's infrastructure cope with all this growth?

Indian authorities are using to build new airports to catch up: 34 of them have been inaugurated over the past 18 months as part of an ambitious plan to build 100 new airports over a period of 15 years, including 70 in green spaces.

Nevertheless, it is the international market that risks being upset.

This is an area in which the country's airlines will face stiff competition from the powerful Gulf companies, which in India have a vital link in their global networks.

But according to CAPA's Somaia, low-cost Indian carriers have a great opportunity ahead of them in international markets.

"There is a convergence of several factors: on the one hand, there is an unmet demand, the expanding middle classes aspiring to move to new places, including many leisure-oriented destinations", a- he declared.

"On the other hand, some major foreign carriers are limited by bilateral rights treaties.The two major full-service carriers, Air India and Jet Airways, focus on sorting out their own internal problems. The arrival of new aircraft and the potential to develop this market is important. "

New opportunities for international travel

With the availability of long-range single-aisle aircraft such as A321neo, ultra-competitive and highly competitive Indian airlines are already considering new opportunities on the international front.

IndiGo is preparing to launch links to Europe, China and other destinations in Southeast Asia, while SpiceJet is interested in former Soviet republics, Singapore, Malaysia and China. . GoAair performed its first international service in Thailand last October.

Meanwhile, Vistara and AirAsia India could follow as soon as they reach the threshold of 20 aircraft required by Indian regulators before launching international flights.

Even if some of these destinations would need an intermediate stop – for example, the cities of Tbilisi and Baku, in Central Asia, were presented as stepping stones for the planned service by IndiGo to London – the airlines Indian low-cost companies are waiting to capture part of the market by offering fares up to 30% lower than current prices.

If the past is a guide – and carriers can replicate their formula abroad – traveling to and from India could be on the brink of becoming a lot cheaper.

Good news for travelers, not so much for incumbent airlines.