Sunday, June 23, 2024

Airlines Are (Finally) Adding Flights To The Indian Hinterland

Ameya Joshi

Ameya Joshi, Aviation & Route Network Analyst

The last couple of months have been busy for IndiGo, as it launched six new international destinations. This involved being the first and only carrier currently operating between India and Indonesia to being the only carrier to operate to Tbilisi, Georgia, and the only Indian carrier to operate to the Central Asian states as it launched flights to Tashkent and Almaty. As Indian carriers expand beyond the traditional route via the main hubs, there is another pattern which is taking shape – that of foreign carriers expanding to Tier II cities in India. 

VietJet – the Vietnamese low-cost carrier is expanding to Kochi and Trichy, Malaysia Airlines will add flights to Amritsar, Trivandrum and Ahmedabad. As the international market grows, there are two distinct things happening – Indian carriers expanding to newer shores hitherto never thought of and foreign carriers operating to India looking at places beyond the top six metro airports. 

What Is Driving It For Indian Carriers?

Indian carriers are expanding at a rapid pace. IndiGo has inducted anywhere between 30 to 50 planes each year, even as it is challenged by the grounding of some of its Pratt & Whitney powered planes. To join IndiGo, will be the Air India group – led by its low-cost subsidiary Air India Express, which is expected to induct 50 MAX 8 aircraft in the next 18 months. With domestic margins being as thin as boarding passes and Indian’s looking to go abroad for a holiday, increasing trade and airports coming up to global standards for transit – there is a race to get a slice of that market, if not capture it. 

The focus has not shifted on “blue oceans” strategy to try out new routes, which comprise a small percentage of total routes thus reducing risks. From competing on domestic routes, to expanding internationally and vying for a slice of the transfer market – Indian carriers have come a long way, but there remains a long way to go.

Foreign Carriers Expanding By Choice Or Lack Of It?

Over the years, the Indian government has effectively used the bilateral air services agreement (BASA) as a tool of diplomatic relations and rightly so. This has meant that additional seats, points, or frequencies have not been granted to carriers for a long time. 

The likes of Emirates have made their requests public while multiple other carriers have used the government channels to request for more seats. The result has still been “no change.” This has impacted carriers from multiple countries like UAE, Qatar, Malaysia, Vietnam, and Singapore amongst others. What differs for the carriers from ASEAN is that India allows open skies to eighteen cities in India for carriers from ASEAN. 

These include Patna and Aurangabad, which have not seen scheduled international flights, and metros Ahmedabad, Lucknow, and Kochi. VietJet is making the most of the open skies policy and has already added flights to Ahmedabad and Kochi, and already announced flights to Trichy, a bastion of Malaysian carriers AirAsia and Batik Air (the erstwhile Malindo) and one of the handful of airports in India where international traffic is more than domestic traffic. The Vietnamese carriers have exhausted their quota of flights to metro routes under the BASA.

China + 1?

More than three years after its onset, speculation continues with respect to the origin of COVID-19 virus. The responses of various governments have been different with China being closed for a longer period than many other countries. This prompted companies to add manufacturing capacity outside China in what became known as “China+1” strategy.

China was a large source market for multiple countries in the region for tourists. This included Thailand, Malaysia, Indonesia, Singapore, and Vietnam. The closure of China, even as the world opened, meant that these countries were struggling. The China + 1 strategy has not surprisingly come to aviation as airlines and tourism boards look at different source markets to not have a repeat of this situation ever. 

Malaysia Airlines, Singapore Airlines, VietJet, Batik Air (erstwhile Malindo), Thai AirAsia are some of the carriers which are expanding to Tier II cities in India, taking benefit of the open skies to 18 destinations in India and all of these had heavy reliance on the Chinese market pre-COVID, thus looking at India to tap the large market and diversify.

How the China market plays out will also decide how airlines deploy capacity. The need for profitability trumps the need for connectivity and if another market pops up, airlines could vacate these routes and shift there. But there remains a possibility that these routes will perform better than they did in the past and airlines may invest more to develop them. 

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