Grounding costs IndiGo its international passenger share, Tata group gains most in Q1 this year

As the regulator Directorate General of Civil Aviation (DGCA) declared the international passenger data for Q1 CY2024, it threw up some interesting numbers. 

Even as IndiGo continued to be the single largest carrier in terms of international traffic to and from India, sequentially it saw a drop of 2.9% amongst all Indian carriers. Interestingly, Air India gained exact 2.9% of the traffic in the same period.

Is this the beginning of Tata group of airlines clawing back its international market share? So far it has been growing its domestic market share, a small bit at a time and it has come at the expense of other carriers and not IndiGo. However, on the international side - few other Indian carriers have sizable international presence with SpiceJet, Akasa Air, and Alliance Air having an international presence which can be best described as “token”.

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In Q1-CY24, the international traffic (from and to India) stood at 1,78,69,231 passengers, according to data released by the DGCA. 44.5% of this traffic was carried by Indian carriers, nearly identical to the previous quarter (Q4-CY23). However, the traffic was the same (44.6%) in the corresponding quarter last year (Q1-CY23) indicating that Indian carriers have not been able to get a larger share of the market, even as the market has grown 17% during the same time.

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How did it happen?

IndiGo was hit by a spate of additional groundings in mid-January. However, the airline was cautious with its cancellations plan and focused on routes that had fewer competitors or monopoly ones and also airports where getting the slots back was relatively easy. 

On the international side, the airline saw 4% fewer departures in Q1-CY24 than the previous quarter (Q4-CY23).

Amongst the Tata group airlines, it was Vistara and Air India Express which took the lead in expansion with Vistara seeing a growth of 16% passengers sequentially, while Air India Express carried 10% more passengers. Parent Air India saw a 5% growth. IndiGo on the other hand might have maintained the departures but saw its passengers go down by 4.3%.

Compared to Q4-CY23; Air India saw 2% additional departures while Vistara and Air India Express saw 15.4% and 9% more departures respectively in Q1-CY24. This comes on the back of Vistara operationalizing its widebody fleet and launching some new routes and Air India Express expanding and taking over some of the routes from parent Air India.

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What does that mean for IndiGo?

With Tata entering aviation and the mega-merger in process, it was largely expected that IndiGo would be under pressure. However, nearly two years since Air India changed hands from government to Tata’s there has been little impact on IndiGo. It has continued with its own expansion plan even while facing the unanticipated engine issues.

The last six months have seen Air India induct six A350s which are yet to be fully utilised for international routes. Air India Express had announced that it would induct 50 planes in 15 months, but these were before the challenges cropped up at Boeing. 

It remains unclear if the target will be met. The group will not get busy with the merger of AIX Connect (erstwhile AirAsia India) with Air India Express and Vistara with Air India. While some focus would be on this, the end result would be that Air India will again be number one in international traffic from India, which was the case pre-COVID. 

Together with Air India Express, the group will be significantly ahead of IndiGo. Both IndiGo and Air India have international expansion plans. Until 2027, IndiGo will have to focus on narrowbody - which can be faster while Air India will start the widebody expansion as early as this year with additional capacity coming in from next year giving it at least 24 months of head start over IndiGo’s widebody deployment.

Tail Note

The growth of international traffic and Indian carriers flying international routes is currently in sync. However for Indian airlines to capture a larger market, one would need to deploy capacity and capacity is hard to come by - thanks to the various issues that the aviation ecosystem is facing, from engines to seats and aircraft parts in addition to quality in some cases.

This has pushed airfares but has not impacted traffic a lot as people have been keen to travel post-COVID. Foreign arrivals in India are yet to catch up to pre-COVID numbers and the current boom is largely driven by Indians wanting to travel abroad. 

As the capacity returns for IndiGo, it will be interesting to see if Air India has started gaining traction on International routes or if the market share loss for IndiGo was only due to a reduction in capacity.