Three months of turbulence: Is India’s air travel boom cooling off?

After years of steady ascent, a sudden turbulence has caught India’s air travel industry unawares. For three months in a row, the number of passengers flying in the country has shown a decline.

That is no good news for the world’s third biggest aviation market in general, and in particular, to its marquee airliners who have placed orders for new aircraft—IndiGo alone has a backlog of nearly 1,000 planes with Airbus.

As per DGCA figures, domestic air traffic declined a sizeable 2.9 per cent in July, then again a drop of 1.4 per cent in August and further fell 2.9 per cent in September.

To put it more succinctly, year-on-year growth, which was as high as 12 per cent in the first half of this year, has now dropped to as low as 1.9 per cent by the second half of the year.

This would make this the worst statistics in Indian aviation since the initial days in 2021-22, when air traffic had just about resumed after the lockdowns. It flies dramatically in the face of the persistent growth witnessed over the past three years or so.

What happened?

On the passenger side, reasons have been attributed to a series of extraordinary incidents this summer—the India-Pakistan clashes in May, which included bloody air battles, use of missiles and drones and the blocking of airspace of both countries dampened sentiments. Closely following this was the June 12 Air India crash in Gujarat, where a London-bound Dreamliner crashed on take-off from Ahmedabad airport, killing 260 people, including 19 on the ground. Industry belief is that this led to further shrinking of bookings, particularly impacting the peak summer schedules. “Ongoing geopolitical and operational headwinds warrant close monitoring for potential downside risks”, was what ICRA said in a recent report.

On the business side, too, things haven’t exactly been hunky dory, despite the gung-ho growth figures otherwise touted around. Though aviation fuel (ATF) prices have been lower year-on-year this financial year, they did go up by 3.3 per cent last month. This could be worrisome, not just for the increase, but also for the decline in the value of the rupee. According to ICRA, “Fuel costs account for 30-40 per cent of airlines’ operating expenses, including aircraft lease payments. Further, 35-50 per cent of operating expenses, fuel expenses, and a significant share of aircraft and engine maintenance expenses are denominated in dollar terms. Also, some airlines have foreign currency debt. Although domestic airlines benefit from a partial natural hedge through earnings from international operations, they have net payables in foreign currency.”

The consultancy has estimated that the net losses of India’s commercial carriers would balloon to more than Rs 10,000 crore by the end of this financial year.

Supply chain issues have also been a bother to airliners. While it had existential outcomes in the case of Go Air which ceased operations in the summer of 2023, other airlines too have been struggling with engine issues and not getting replacements on time—IndiGo, for example, had to put out of operation as many as 70 aircraft in the summer of 2024, though the situation is reported to have improved to just 40 aircraft out of business now. What all this means is not only fewer planes to operate, resulting in a reduction of services, but also higher operating costs for the airlines since they often lease planes at high costs to cover up the deficiency at least in high-frequency routes.

Silver lining

But there is a silver lining. Despite the decrease in numbers, the outlook for the industry still remains bright, keeping in mind two factors: one, the months of decline are traditionally lean monsoon months, when schools reopen and business activity also is not on the upswing, and hence the decline is not much of a bother.

Secondly, October’s passenger figures do show an uptick of 6.3 per cent. While this was expected, being the peak festive month locally, the proof of the pudding will be the figures of the rest of the ‘high’ season, November and December, and whether the figures stay out of the red in these months, too.

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