Indian Airlines Face Rising Costs, Offset by Growing Demand
Indian airlines are expected to face greater industry-wide losses in the fiscal year 2025 due to increasing operational expenses that may outweigh rising demand and higher ticket prices, according to a top aviation consultancy.
CAPA India has estimated losses for the year ending March 2025 to be between $400 million and $600 million. This is a significant increase compared to the $300 million to $400 million loss reported in the previous year, which was partially offset by IndiGo’s record profit.
The aviation industry’s overall costs are projected to increase by 3.8% in fiscal year 2025. India currently holds the distinction of being the world’s fastest-growing aviation market, with demand outpacing the supply of aircraft. This has allowed airlines to charge higher fares due to a capacity crunch, resulting in more packed planes, measured by passenger load factor (PLF).
CAPA anticipates that the trend of record yields—the average amount paid by a passenger to fly one kilometer—will continue in the short term, with an estimated 1% rise for fiscal 2025. The consultancy also projects PLF to reach 85% for the same period.
However, the addition of 84 aircraft in the current year is expected to alleviate some of the capacity constraints. This will bring the airlines’ overall fleet, including grounded jets, to 812 from the 728 reported in March, according to Kapil Kaul, CEO of CAPA India. Kaul also noted that the fleet size is projected to more than double by 2030.
India’s aviation industry is largely dominated by low-cost carrier IndiGo, which holds a commanding 60% market share. The Air India group, which consists of two budget carriers and two full-service carriers, Air India and Vistara, holds approximately 30% of the market share. Together, these airlines have placed orders for over a thousand aircraft from Airbus and Boeing.
CAPA India estimates that domestic passenger traffic will grow to a range of 161 million to 164 million from the current level of approximately 154 million. The consultancy also projects international traffic to increase from 75 million to 78 million.
