Aviation Diaries Day 3

#100daychallenge

India accounts for 17.8% of the global population, but only accounts for 4.2% of passengers. Disposable incomes and the population are also on the rise. These factors underpin a clear opportunity for growth in India's aviation sector. Major companies have noticed this and started building capacity to address future demand. Over the last decade, the commercial aircraft fleet has grown at a CAGR of 7.6% (3x the global average). Currently the aircraft fleet consists of more than 860 aircrafts, more than half of which is held by Indigo (434). 

 India also has one of the youngest fleets in the world, with the average aircraft age at 7.3 years compared to the global average of 14.8 years. Hence, many Indian airlines report a greater depreciation expense than their international counterparts but also have a lower maintenance cost. 

Financially speaking, India has been a challenging market for airlines, with many airlines failing in the past. More than 15 Indian airlines have failed in the last 2 decades. The revenues of the aviation sector were at an all-time high in 2024, and since 2020, airlines in India have been on a constant growth trajectory. However, on the profitability front, Indian airlines are clearly struggling. The aviation sector (as a whole) had a positive EBIT only in 4 years, from 2014 to 2023, and had a net profit in only one of these years. 

 There are reasons for recent optimism, as post-COVID, the financial performance of airlines has seen stellar growth. Indigo, India’s largest airline, has been operating at a very good rate with healthy margins as well. 

 Will the aviation sector continue its growth trajectory? Only time will tell. But one thing is for sure, this journey would not be one without turbulence.

Authored by Laksh Karrn Ranglani