FILE PHOTO: An Air India Airbus A320-200 aircraft takes off as an IndiGo Airlines aircraft waits for clearance at the Sardar Vallabhbhai Patel International Airport in Ahmedabad, India, July 7, 2017. REUTERS/Amit Dave/File Photo | Photo Credit: AMIT DAVE
India has the potential to see 500-700 million people travelling by air in a year within the next two decades, as global aviation should break even in the 2022 calendar year amid a quicker-than-expected recovery of the industry.
If our country registers a growth rate of five to eight percent, it means the middle class is growing, which will lead to more people getting on a flight. Every half percent increase in GDP, typically requires 10 percent growth in travel, which also includes air. The industry and the airlines are in a mess now, but India can still emerge as the leading nation in the aviation market in the next 15 to 20 years.
There is a huge pent-up demand, as people want to travel more now than ever before, as the pandemic ensured that their movements were completely restricted. At the same time, it is important to sort out certain inconsistencies in travel regulations for international travel to pick up.
Increasing fares
We firmly believe that the rising fuel price is bound to increase the fares, as fuel costs constitute around 40 per cent of the total costs for airlines. At the same time, the passenger fares of Indian domestic airlines are much lower than those of their counterparts in their respective countries. This mismatch poses a huge challenge to the business viability of the Indian civil aviation sector, forcing several airlines to shut shop in recent years.
Adopting technology
What will enable faster growth will be the effective use of technology. Digitisation will create new jobs, even though some repetitive jobs may become redundant with the adoption of AI, robotics and machine learning.
However, it does not mean the adoption of technology will lead to large scale retrenchment of people. Obviously, many of the employees will have to upskill to keep up with evolving jobs.
It is also important to understand that newer players in the airline industry will only help the sector, as it will see better connectivity, efficiency and customer experience. Having acquired Air India, Tata Sons will have to focus more on ironing out the issues regarding cost and revenue imbalance. Also, most of the assets would require either replacement or refurbishment. As a flag carrier, the bilateral agreements and landing rights at major global airports should help the conglomerate considerably.
The author is the IBS Software Founder and Executive Chairman (as told to Sajeev Kumar).
Published on November 28, 2021