Saturday, Jan 19, 2019 | Last Update : 09:10 AM IST
India is one of the cheapest domestic airline markets in the world, with an average fare of 13 cents per kilometre flown.
New Delhi: Indian airlines are turning to the international market in search of better returns as the intensifying fight for a bigger share of the world’s fastest growing domestic market - where price is king - drives down profits.
While global airlines’ profits have been strong since 2015 - though with wide regional variations - Indian carriers are struggling to remain profitable, despite filling nearly 90 per cent of their seats and benefiting from a more than doubling of domestic passenger numbers over the last four years.
“It is an incredibly tough domestic market, very price sensitive,” said Stephen Barnes, chief financial officer of Singapore Airlines, which operates an Indian carrier, Vistara, in a joint venture with the Tata Group.
“Commanding a premium for a premium product is hard to do. From our perspective we invested in order to see the business grow internationally. If you look at the results of Indian airlines their performance is better internationally.”
Promotions such as $50 one-way tickets on the two-hour flight from Mumbai to Delhi are easy to find and, with airlines expected to take delivery of more than 500 aircraft over the next five years, pressure on fares and profits is increasing.
India is one of the cheapest domestic airline markets in the world, with an average fare of 13 cents per kilometre flown, according to data from travel firm Rome2Rio, less than half the 27 cents per km average in China and the United States.
Airlines including Vistara, SpiceJet Ltd and InterGlobe Aviation Ltd’s IndiGo are in talks to buy or lease widebody aircraft as they firm up international growth plans to boost profitability.
There is huge potential for international travel from India, where the domestic aviation market has grown about 20 per cent annually in recent years.
Only 0.3 per cent of the 1.3 billion population currently travel abroad for a holiday every year, a fraction of the estimated 100 million Indians who could potentially afford to do so, according to an analysis of household income by aviation consultancy, CAPA.
The international market is dominated by foreign carriers but the market share of Indian airlines including Air India and Jet Airways has been climbing, helped by policies that limit access by foreign carriers, and reached about 38 per cent in 2017, up from 31 per cent a decade earlier.
Foreign airlines such as Emirates and Hong Kong’s Cathay Pacific Airways have reached the limit of flights into India allowed under bilateral agreements and New Delhi has not extended additional rights, creating an opening for domestic carriers to grow, said Binit Somaia, director for South Asia at CAPA.
“Demand is there, income levels are rising and people want to travel internationally,” he said.
Jet Airways is considering launching new flights from Mumbai to Sydney, two sources with knowledge of the matter said, while Vistara is planning to order six Boeing Co 787 aircraft and will expand its narrowbody fleet of Airbus A320neos as it starts international flights, sources have said.