The Indian economy is progressing due to the collective efforts of various sectors and industries. Every sector operates to cater to a specific demand and earns revenues, which considerably adds to the Indian GDP and ensures that the country can develop further. Almost everything you do in your daily life is made possible by the operations of a specific sector. If you are buying medicines, it falls into the operations of the pharmaceutical sector, and if you are taking a flight, thank the aviation sector.
Furthermore, understanding these sectors in detail also helps investors identify available sectors and stocks that can provide them with good profits. In this blog, you will learn about the airline industry in India and how it operates in the current market.
Key aspects of the aviation sector in India
The airline industry in India is currently the 9th largest in the world. It adds over Rs. 18.32 lakh crore to the annual Indian GDP. The aviation industry in India supports an average of 41 million international and 121 million domestic passengers and has 85 international airlines operating within the sector.
Here are the key aspects of the aviation industry in India:
1. Revenue:
The Indian aviation sector was at its lowest during the COVID-19 pandemic. Due to lockdowns and travel restrictions, the demand for flights was almost negligible. However, as there are no restrictions now, the sector has seen utmost growth in the past few years. Domestic passenger traffic reported a 6% increase in February 2024, 3% higher than the pre-COVID levels. However, the aviation sector in India is still to reach its true potential. In FY 2023, it reported a net loss of Rs. 17,000 crores, which is much lower than the loss of Rs. 21,700 crores in FY 2022. However, given the stable outlook of the industry, experts believe in extensive recovery and better revenue in the coming years.
2. New orders:
The aviation industry in India is going through a substantial recovery and is witnessing higher demand. The recent takeover of Air India by the Tata Group has also fueled the sector to invest more in better aircraft. Hence, the Indian airlines have started a shopping spree. Over the past 15 months, all the Indian airlines combined have ordered 1,150 aircraft to ensure they meet the higher demand. One example of new orders is Airbus, which received an order to supply 70 Airbus A350 family aircraft to IndiGo. In February 2023, Tata’s Air India ordered 470 planes—220 from Boeing and 250 from Airbus—with a combined value of over Rs. 58,000 crores. The recent orders mean that the airline industry in India is poised to take on higher demand and aims to recover to its full potential.
3. Net profit:
The Indian aviation industry made net profits every quarter before the COVID-19 pandemic. However, it has not yet made a net profit as it is still in the recovery phase. Furthermore, it has also been struggling with supply chain challenges, further lowering its potential to make profits. In FY2023, the aviation industry's net loss in India stood at Rs. 17,000-18,000 crores. However, the Investment Information and Credit Rating Agency of India Limited (ICRA) expects this net loss to significantly decrease to Rs. 3,000-4,000 crores next year. Based on its year-on-year performance and lower net loss each year, the aviation industry in India is on the path to making a net profit in a few years.
4. Research and development:
The airline industry in India is one of those sectors that is deep in research and development. As the aviation sector is under the direct governance of the Ministry of Civil Aviation, research and development have led to new initiatives. In 2023, the aviation industry created 456 more posts of Air Traffic Controllers, and the DGCA issued the most-ever commercial pilot licences. The introduction of Digi Yatra has helped more than 91 lakh passengers take flights with contactless and seamless processing.
5. Attrition:
The airline industry in India has witnessed a lot of attrition than any other Indian industry. Airlines such as SpiceJet have struggled financially, with numerous tries to take the cash-affected airline out of bankruptcy. Furthermore, the sector has also been negatively affected by infrastructure constraints, supply chain restrictions, skills gaps, lack of pilots, and regulatory hurdles.
It remains to be seen how the sector tackles these attritions with a mix of personal and governmental initiatives.
Summing up the synopsis of the aviation industry in India
The aviation industry in India is one of the most important as it helps domestic and international passengers travel and is also critical for moving cargo within and outside the Indian borders. The sector is still in the recovery phase and has yet to reach its pre-COVID levels of revenue and net profits. However, with added initiatives and new orders, the aviation sector is on the path to adding more to the Indian GDP but needs to tackle the negative factors successfully.
Conclusion
Understanding the airline industry in India is crucial as it helps to grasp the overall economy's performance. Furthermore, if you are an investor, it helps in sectoral research to understand whether you should invest in aviation stocks for better returns. Now that you know the overview of the aviation industry in India, you can make better investment decisions and ensure a balanced portfolio.
