Brighter Future for Indian Airlines – CAPA Outlook 2015

Recent changes in the Aviation Turbine Fuel (ATF) created a turnaround in the global aviation market. It helped carriers in reducing their debts, especially Indian airlines, to a large extent. As per the Centre for Asia Pacific Aviation (CAPA) Outlook 2015, India is a promising market for air service providers, despite of the high cost of operations. This is the reason that global carriers like Etihad and Emirates are interested in stakes of Indian airlines. It is expected that this trend will continue in the coming future as the government is also making changes in the aviation rules and regulations.

One of the crucial decisions taken by respective authorities in India is increasing the limit of foreign Direct Investment (FDI) up to 49 per cent. This allows airlines to raise funds quite conveniently for its expansion and growth to meet the increasing demand in this sector. In addition, the aviation ministry is also considering the abolition of 5/20 rule, which compels carriers to operate in domestic for at least 5 years and own 20 aircraft before commencing international business. This will help the newly launched Indian airlines in planning their expansion, without any hindrance. It may result in cheap domestic services, such as Delhi to Ahmedabad flights as well as international ones like Mumbai to Singapore and many others. To attract higher number of fliers, these carriers also offer discount on their tickets on special occasions like Ram Navami, Diwali and Holi. This in turn increases the demand for air travel even further.

The previous report presented by CAPA for the financial year 2014 proved to be more or less accurate. The traffic growth rate was in line with estimates for first three quarters, but the last quarter proved to be quite unstable. These estimates mentioned a growth of 4-6 and 10-12 per cent in domestic and international traffic, respectively. While the actual figure for the latter one was approximately 10.7 in the first eight month, and the former one was closer to the upper end of estimation. However, the revised report after analysing the current market scenario shows growth of 10-12 per cent in domestic traffic.