India’s aviation sector is gearing up for a new entrant as Shankh Air, the first scheduled airline from Uttar Pradesh, has secured approval from the Civil Aviation Ministry. This approval marks a big step towards its operational debut, though the airline will require additional clearance from the Directorate General of Civil Aviation (DGCA) before it can commence flights, reported The Economic Times.
Shankh Air, with hubs in Lucknow and Noida, is poised to serve both interstate and intrastate routes, targeting regions with high demand and limited direct flight options. The airline’s strategy, as outlined on its official website, is to connect major cities across India, enhancing regional mobility and improving air connectivity in underserved areas.
According to the letter of approval from the ministry, Shankh Air must comply with foreign direct investment, market regulator Sebi, and other regulatory guidelines. The No-Objection Certificate (NOC) issued for its operations will be valid for three years.
Changing dynamics of India’s aviation market
Shankh Air’s entry comes at a time of consolidation in India’s aviation sector, dominated by larger players. IndiGo, the country’s largest airline, holds a commanding 63 per cent market share, and is expanding further.
Meanwhile, Air India, which ranks second, is undergoing significant restructuring. Air India is set to merge with Vistara, co-owned by the Tata Group and Singapore Airlines, by next year, subject to regulatory approvals.
Additionally, Air India is integrating AirAsia India into its low-cost subsidiary, Air India Express, further solidifying its presence.
Industry experts see a clear trend towards consolidation, with a few dominant airlines expected to control 75 per cent of the market, leaving smaller carriers with limited room to compete. According to Rajat Mahajan, partner at Deloitte Consulting, this concentration will lead to fewer choices for consumers and higher ticket prices.
Newer players like Akasa Air and Fly91, despite entering the market with promise, face fierce competition from the established giants. Akasa, founded by the late Rakesh Jhunjhunwala, and Fly91, led by Harsha Raghavan and Manoj Chacko, are attempting to carve out a niche in this rapidly evolving industry.
India’s aviation market: Opportunities and challenges
India is now the third-largest domestic aviation market globally, and despite the struggles of some airlines, the sector remains buoyant. In FY24, India handled 376 million passengers, marking a 15 per cent Year-on-Year (YoY) increase in air passenger traffic. The outlook for the current financial year is positive, with domestic traffic expected to rise by 6-8 per cent and international traffic by 9-11 per cent, according to data from aviation advisory firm CAPA India.
With domestic aviation penetration at just 10 per cent, the Indian government is pushing for further expansion. The Udega Desh ka Aam Nagrik (UDAAN) programme, aimed at enhancing regional connectivity, is set to continue for another decade, adding hundreds of new airports to the country’s aviation network.
Airline industry looking for recovery
Despite these opportunities, the sector has also witnessed high-profile bankruptcies in recent years, including Kingfisher Airlines, Jet Airways, and most recently, Go First. These failures highlight the industry’s challenges, such as high operational costs, volatile fuel prices, and leasing costs for aircraft.
However, Indian airlines are preparing for growth, with 84 new aircraft expected to enter service by March 2025, bringing the total to 812 planes. Over the coming years, nearly 2,000 aircraft are set to join the domestic fleet, underscoring the industry’s commitment to long-term expansion.
India’s airlines are also poised to capture a larger share of international traffic, which is projected to increase to 50 per cent by FY28, up from 43 per cent in the previous fiscal year. Credit ratings agency CRISIL attributes this growth to the introduction of new routes, an increase in aircraft deployments, and the strong domestic connectivity offered by Indian carriers compared to their foreign counterparts.
First Published: Sep 24 2024 | 5:48 PM IST
