More Indians take to the skies.

Even as a rising crude oil bill has once again pushed airlines into the red over the last two quarters, air passenger traffic in the country has been growing strong and steady. This is in continuation of a trend seen over the last 24 months, where an uptick in the economic climate has translated into a growing number of Indians taking to the skies.

Consider this: Total air passenger traffic in the domestic market was around 41 million in calendar 2008; it exceeded the 51-million mark in 2010, and at current levels of traffic may touch 60 million in the current calendar. Monthly passenger traffic exceeded the 5-million mark for the first time in December 2010, and has been above this level for two consecutive months in May 2011 and June 2011.

Strong revival

At present, India is among the fastest growing aviation markets in the world. After a sharp 9.5 per cent decline in domestic traffic in the first half of calendar 2009 due to the knock-on effects of the global recession, the number of Indians taking to the skies has seen a strong revival. Passenger traffic in the domestic skies grew at 24.7 per cent year-on-year in the second half of calendar 2009, at 19.2 per cent in calendar 2010, and at a lower but still quite healthy 17.3 per cent in the first six months of the current calendar. The strong growth in passenger traffic is also reflected in the domestic load factor, which has increased from 70.1 per cent in 2009 to 76.9 per cent in the first half of 2011.

Increasing disposable incomes, healthy corporate travel budgets and keen competition among airlines to grow the market and capture an increasing share of the pie, have contributed to the strong growth in domestic air passenger traffic. Add to the above factors the increasing focus of airline players towards the under-served and high potential Tier-II and Tier-III cities, and passenger traffic in the country is expected to continue growing at a robust clip — in the mid to high teens. Airlines, especially the low-cost carriers, have announced ambitious fleet expansion plans to cater to the expected market growth.

Low-cost surge

A widening bouquet of low-cost offerings catering to a predominantly price-conscious market has helped a good deal in increasing penetration in the domestic skies. Not surprisingly, a significant portion of the passenger growth has been captured by low-cost carriers and the low-cost offerings of full service carriers. The market share of low-cost carriers has increased from 33.3 per cent in December 2009 to 39.7 per cent in June 2011, with Indigo Airlines leading the way (up from 15.2 per cent to 19.6 per cent). Much of this gain has been made at the expense of Air India which has seen its share decline from 18.3 per cent in December 2009 to 14.9 per cent in June 2011.

Source: http://www.thehindubusinessline.com