India’s outbound journey market will not overtake China’s anytime quickly: analyst

Many travelers are waiting to check in for their flight at Indira Gandhi International Airport in Delhi, India on May 31, 2022.

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India’s airline industry may be on a strong growth trajectory – but don’t expect India’s outbound travel to overtake China’s anytime soon, aviation analysts say.

Demand for travel to and from India is expected to increase as the country’s middle class grows and more residents travel abroad for the first time, said Brendan Sobie, an independent analyst at Sobie Aviation. But “don’t expect India to be a bigger foreign market than China anytime soon.”

The South Asian nation could overtake China as the world’s most populous country, but there remains a “massive gap” between its aviation markets, Sobie said.

“The divide between China and India is huge,” Lalitya Dhavala, a reviews consultant at travel analytics company Cirium, told CNBC.

Although India has the world’s third-largest aviation market, “China’s total fleet is almost five times the size of India’s existing fleet for an almost equal population,” she said, noting that this “indicates room for expansion.”

Furthermore, only 7.3% of India’s current population holds a passport, Dhavala pointed out.

India’s robust growth trajectory

Analysts agree that the Indian domestic and outbound travel market has potential for growth.

Compared to China, India has a larger proportion of young adults, with 40% of the population under the age of 25, Dhavala said. “This generation is on an emerging economic path with a growing desire and appetite to travel and explore the world.”

According to data from Statista, the under-29s accounted for 34.12% of China’s population in 2021.

China has a rapidly growing population. Only 7% of India’s population was made up of adults aged 65 and over that year, compared with 14% in China, data from the Pew Research Center showed.

As more women enter the labor market, a two-income household would also give families more purchasing power, she added.

“India is going to become one of those key pillars of global aviation, and the next few years… India’s story is just like everyone else’s,” Air India CEO Campbell Wilson told CNBC this week when asked if India’s travel industry might be overtaking could China’s.

Shot in the arm for infrastructure

Prime Minister Narendra Modi’s government said it will spend $12 billion by 2025 to improve regional connectivity by building new airports and refurbishing existing ones, Reuters reported.

On Monday, the government announced further infrastructure investments for the aviation sector: to increase the number of airports, airlines and staff to keep up with travel demand to and from India, which has been increasing rapidly after the pandemic abated.

“Without infrastructure investment, there is a risk that there will be more demand for flights but not enough infrastructure to handle the flights, especially in big cities,” Sobie said.

The country’s aviation sector “is entering its growth phase,” said Civil Aviation Minister Jyotiraditya Scindia. “We need to build civil aviation infrastructure and capabilities [so] that by 2047 we will be able to support a $20 trillion economy in India.”

“At one point we ran out of passengers to refuel [the] Airlines because of Covid. Now we don’t have enough planes to fly our passengers,” Scindia said earlier this week during the CAPA India Aviation Summit in New Delhi.

India, the world’s fastest growing economy according to the World Economic Forum, welcomed 410,000 passengers a day in 2019 before Covid struck – but that has hit new highs of 456,000 passengers in recent months, Scindia claimed.

Although the high season is over in October, the airports still welcome between 420,000 and 440,000 passengers daily.

Scindia added that passenger capacity at the country’s six major airports is set to increase to 420 million in four years from the current 192 million.

Looking beyond India’s borders

Anticipating an influx of passengers in the coming year, both domestic and international, national carrier Air India announced in February that it will purchase 470 Boeing and Airbus aircraft – a decision that gives Scindia the “biggest order in the… History of International Civil Aviation”.

Late last year, Indian conglomerate Tata Group announced that Vistara would merge with national carrier Air India by March 2024. Vistara is a joint venture between Tata Sons and Singapore Airlines. After the merger, SIA will own 25.1% of Air India.

“The opportunity for Indian aviation is huge…the growth opportunity is very, very real,” Air India’s Wilson said Monday, adding that India’s flagship is focused on growing internationally to catch up with its competitors.

Indian airlines are still largely focused on their domestic operations, with only 8% of major carriers offering international routes, Cirium’s Dhavala said.

But she said she is optimistic the government will look beyond its borders as the country aims to become a “regional hub and not [having flights] through the Middle East or Europe.”

The total fleet of Indian airlines is projected to double in the next five to 10 years, representing a 15% growth rate over the next eight years, Dhavala noted.

“If we can offer an uninterrupted supply of excellent quality and service, [and flies] Going non-stop to the places that Indian travelers or people traveling to India want to go is an opportunity many times greater than has been apparent in the past,” said Wilson.

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