India air travel: International footfalls are not growing as fast as domestic

Indian domestic aviation recorded its highest-ever single-day traffic on Sunday, April 21. This comes on the back of record numbers in the financial year ending March 2024 and the calendar year 2023, along with the highest-ever profits by IndiGo in the last financial year. The financial year ended with 37.64 crore footfalls for both domestic and international passengers in India. A staggering 81.5 per cent of passengers were domestic, with the rest being international. This was the first full year of operations without any restrictions since the onset of COVID.

The traffic saw a growth of 15 per cent over the previous financial year and the growth was 9.2 per cent as compared to pre-COVID times. However, the growth was uneven with the domestic segment seeing a growth of 11.5 per cent, while there was no growth recorded for international. The international footfalls for FY24 were 6,96,38,262 which was only two lakh more than FY19 when 6,94,80,768 passengers were recorded on international segments, which includes both arrivals and departures.

For a sample month of January this year, the Indian carriers were offering only 12 per cent more seats on international routes as compared to January 2020 – a few months before COVID hit India. The more surprising part is that the domestic offering is down 8 per cent when compared to the same months, yet the traffic has grown. Foreign carriers saw a dip of 2.2 per cent, but the overall change isn’t such that it will impact capacity in the market.

Where is the international traffic?

International footfalls showed a better recovery in FY24 than domestic, growing 22.3 per cent, while domestic growth was 13 per cent, on a YoY basis. However, when compared to pre-COVID times, international growth is next to nil while domestic has been 11.4 per cent. This is even while SpiceJet has shrunk and Go Air (later Go FIRST) went down in May last year.

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How did the traffic not grow? The growth has been on the edge for a while until countries enticed Indians with visa-free travel or visa on arrival, which has been the case with Thailand and Malaysia. While travel to South East Asia has been on the rise, largely led by increased connectivity, travel to Europe and North America is yet to see its heydays.

Europe has seen an ongoing war since 2022, along with the delay in issuing Schengen visas. The non-stop flights to the United States and Canada have taken a beating, again thanks to the reciprocal non-use of Russian airspace by American carriers. This has gone down well for Air India, but the overall traffic remains impacted. The visa situation with the United States is no different than Schengen, if not worse.

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International expansion: Is it a double-edged sword?

Airlines in India have focused on international expansion for the last year. Air India group is working towards shifting some flights from Air India mainline to low-cost carrier Air India Express, while it works towards expansion. New horizons like Indonesia, Vietnam, and countries in Central Asia and Africa are now on the radar for Indian carriers for further expansion. Is this a double-edged sword for the airlines when international traffic isn’t growing?

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Both IndiGo and Air India have talked about international being their core focus area in the years to come. IndiGo had earlier given specific growth targets for the international side of operations, where it still deploys less than 15 per cent of its departures and capacity. If the traffic does not grow, how does it bode well with the plan?

The data indicates that this is more of a blip than a pattern, and it has taken longer for international traffic to recover after the pandemic. IndiGo’s confidence seems to be high, especially after placing the order for 30 A350s. With a larger middle class, the growth rate of international traffic could well be higher in the next few years as compared to domestic growth. For growth to continue, capacity has to be inducted, and that seems to be the biggest challenge right now as airlines across the world battle supply chain issues.