Posted on March 09 2021
The Indian airline market has always had huge potential for airlines due to its size, but profitability has remained elusive.
On the international side, overseas airlines have traditionally been more successful than local airlines in tapping into this market. However, the expansion of India’s LCCs into the international market and the disruption of international services by the pandemic have changed this dynamic somewhat.
On the domestic front, strong competition and excess capacity growth have hindered financial returns. When domestic services resumed in May 2020, the government imposed a cap of 33% of normal domestic capacity for Indian carriers, as well as fare caps. The capacity limit was gradually lifted, increasing to 80% in December 2020. The chart below shows that domestic seat capacity has reached almost 75% of year-ago levels by January.
A much more rational airline industry in India could emerge from the COVID-19 crisis. International demand, in particular, is likely to take some time to recover, which will put downward pressure on capacity. But structural changes within the industry itself will also help.