Thursday, October 5, 2023

Indian Carriers Eye International Routes

By Ameya Joshi

The month of August saw IndiGo expand into new territory, from Nairobi in Kenya to Jakarta, Indonesia. The routes are long and stretch the limits of the A320neo, which the airline is deploying on these flights. This marks the foray of IndiGo in Africa and the longer routes that the airline wants to try when the A321XLRs join next year or in 2025.

IndiGo – the country’s largest carrier by fleet and market share, has been focusing on international expansion even before the pandemic. The expansion has been periodic, from launching flights to Turkey and China to consolidating its presence in the Middle East markets and catering to the holiday crowds in Thailand. Yet, the management has been talking about international expansion taking the driver’s seat while giving capacity guidance every quarter. 

There are some obvious reasons for expanding international services. Foremost being access to foreign exchange. With most of the aircraft leased by airlines in India and the lease rentals pegged to US dollars, a sliding rupee creates havoc on the balance sheet. With such an expanse of IndiGo with 300+ aircraft, the international operations are negligible, and they have a long way to go to cover the gap.

The Numbers Speak Louder 

A consolidation of data released by the Directorate General of Civil Aviation (DGCA) for the month of June shows that IndiGo carried 9,45,202 international passengers as compared to Air India’s 6,79,701 and was the leader amongst Indian carriers operating international flights, but this constituted only 10.69% of total passengers IndiGo carried in June this year. For Air India, the international to-domestic mix of passengers stands at 35.92% for international. The split is lowest in favour of International for IndiGo, amongst the four carriers flying international and domestic from India, viz. Air India, IndiGo, Vistara and SpiceJet. Air India Express also flies on domestic routes; however, all its capacity is deployed for international operations; thus the question of a split between domestic and international does not arise.

When it comes to the split between domestic and international, the metric is driven by three counts – Passengers, Departures and Capacity (by Available Seat Kilometres). By departures, IndiGo operated 5479 international departures, while it operated 49,989 domestic departures. The split is 9.9% international, with 90.1% being domestic. For Air India, the split stands at 29.22% of its departures being international (3582), while domestic departures stood at 8676. 

When it comes to capacity by ASK, the split is stark. The ASKs are calculated as a product of seats in the aircraft multiplied by the distance travelled in kilometres. With its non-stop network to the US, Canada, Europe, and Australia, Air India triumphs over everybody else. Suppose, IndiGo and Air India fly the Delhi – Dubai route, with IndiGo plying the A321neo with 222 seats while Air India operates the 787 Dreamliner with 256 seats. The capacity deployed in ASK by IndiGo is 4,85,736, while that by Air India is 5,60,128. 

Again, IndiGo has only 25% of its total capacity by ASK on international routes, while it is exactly the opposite for Air India, which deploys 75% of its total capacity on international routes. Vistara and SpiceJet deployed 39.6% and 35.1% capacity by ASK on international routes in June, respectively. 

Why The Focus On International?

The Indian domestic market has been cutthroat in the past until the present, where it will be divided amongst the IndiGo and Tata Group of airlines. Apart from the obvious benefits of foreign exchange, international operations are at lesser risk of undercutting fares, governed by bilateral rights and will not see dumping of capacity by carriers. 

The seasonality in international operations is not as sharp as domestic, and two flights a day sufficiently cover the utilisation planned for typical domestic operations, helping maintain the block hour utilisation but at lower maintenance cost since the number of landings and take-offs or cycles is much lower.

Tail Note

The Q1 of CY23 saw Indian carriers fly 44% of total international travellers in and out of India. This was higher than when Jet Airways operated its international operations via its hub in Amsterdam. This is due to Air India scaling up its North America operations and IndiGo expanding in the region. 

The next big milestone for Indian aviation will be to cross the 50% mark in handling international passengers. The government has tactfully held back pressure from the Middle Eastern governments to revise the Bilateral Air Services Agreement (BASA) so that foreign carriers do not expand at the expense of Indian carriers, but this may not be permanent. Air India and IndiGo have to be in a position to offer better options to Indian passengers. 

How are the operations split between Domestic and International?

AirlineDeparturesPassengersCapacity by ASK
Air India70.78%29.22%64.08%35.92%24.16%75.84%
Source: DGCA

Ameya Joshi is an aviation analyst and columnist who runs the analysis website Network Thoughts 

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