India’s aviation industry is gearing up for a significant transformation with the introduction of three new homegrown airlines in early 2024. This marks an exciting new chapter for domestic air travel, following a year of impressive growth. In 2023, passenger traffic in India surged by 23.57 percent year-on-year (YoY), primarily driven by increased domestic departures. This growth trend presents a prime opportunity for new airlines to enter the market, as reported by CNBC Tv18.
Newly Approved Airlines
India’s three new airlines are Air Kerala and Alhindair, both based in Kerala, along with Shankh Air from Uttar Pradesh. These airlines have already received their No Objection Certificates (NOC) from the Ministry of Civil Aviation and are currently working towards obtaining their Air Operator Certificates (AOC). Once these certifications are secured, they will be able to commence commercial operations on scheduled routes. Initially, these carriers will focus on improving regional connectivity within their respective states before gradually expanding to inter-state routes.
High-Demand Routes
Once established in the domestic market, Air Kerala and Alhindair aim to tap into the lucrative routes between South India and the Middle East. This strategy is especially relevant due to the substantial expatriate community in the region, which generates significant travel demand. By concentrating on regional connectivity first, these new entrants can build a solid foundation before competing on more established routes.
Market Growth
The Indian aviation market is primed for expansion, with domestic air passenger traffic reaching 152 million in 2023, a notable increase from 123 million in 2022. This growth is indicative of the rising middle class and increased demand for air travel in the country. Currently, IndiGo dominates the market with over 62 percent market share, while Tata Group airlines, including Air India and Vistara, account for nearly 30 percent. The entry of these new airlines could reshape the competitive landscape, offering consumers more options and potentially leading to better pricing.
Concerns of Market Duopoly
The recent grounding of Jet Airways in 2019 and Go First in 2023 raised concerns about a potential duopoly, with IndiGo and Tata Group airlines controlling the majority of the market. However, with SpiceJet securing fresh capital and the impending arrival of these new players, competition is anticipated to intensify, providing a boost to market sentiment and enhancing choices for consumers.
