Why India’s Aviation Market Has Huge Untapped Potential, According to Industry Leaders

Air India, IndiGo, IATA and SriLankan Airlines executives highlighted India’s low air-travel penetration, young population, expanding middle class and improving airport infrastructure as major drivers of long-term aviation growth during the 2023 Indian Travel Congress in Colombo.

India’s aviation industry has substantial room to expand, according to senior executives from some of the country’s largest airlines and global aviation bodies.

At the Indian Travel Congress in Colombo in July 2023, aviation leaders pointed to several structural factors behind India’s long-term growth prospects, including a rapidly urbanising population, a growing middle class, rising incomes and increasing investment in airports.

The speakers included Nipun Aggarwal, then Air India’s chief commercial and transformation officer; Pieter Elbers, CEO of IndiGo; Richard Nuttall, CEO of SriLankan Airlines; and Amitabh Khosla, IATA’s country director for India.

Their assessments came as the global aviation and tourism industries continued recovering from the disruption caused by the COVID-19 pandemic.

India’s aviation market was already among the world’s largest

Aggarwal described India as the third-largest and one of the fastest-growing aviation markets globally.

He said the country’s aviation market had expanded at close to 10% annually over the preceding decade, significantly faster than the global average.

But the more important point, in his assessment, was the gap between India’s current level of air travel and the size of its population and economy.

India has a population of more than a billion people, but air-travel penetration remained relatively low compared with other major aviation markets.

That combination creates substantial potential for future demand.

Low air-travel penetration leaves room for growth

One of the figures highlighted by Aggarwal was the number of trips made per person.

He said India was recording approximately 0.1 air trips per capita, compared with around 0.5 trips per capita in China.

The comparison was used to illustrate how much additional demand could potentially emerge as Indian incomes rise and more people become regular air travellers.

Air travel demand tends to increase as household incomes improve, particularly when consumers move into middle- and higher-income categories.

For India, the opportunity is not simply to attract existing travellers more frequently. It is also to bring a much larger number of first-time or occasional travellers into the aviation system.

A growing middle class could support passenger demand

India’s demographic structure was another major theme at the conference.

Industry leaders pointed to the expansion of the country’s middle class, rising disposable income and rapid urbanisation as important factors supporting long-term travel demand.

India also has a relatively young population.

Younger consumers often have higher mobility needs and can contribute to stronger demand for domestic holidays, business travel, education-related travel and visits to family members living in other cities or countries.

The Ministry of Civil Aviation had similarly highlighted rising disposable income among middle- and high-income households and India’s large young population as structural supports for aviation demand.

Airport privatisation and infrastructure investment are changing supply

Aggarwal also pointed to improvements on the supply side.

He described airport privatisation and investment in aviation infrastructure as important developments for the sector.

New airports are being built, while existing facilities are undergoing expansion and modernisation.

This matters because aviation growth requires capacity at multiple points in the system.

More passengers require more terminal space, runways, aircraft stands, baggage infrastructure, air-traffic capacity and ground-handling services.

If infrastructure expands in line with demand, airlines have more room to add routes and frequencies.

India could eventually handle far more air travellers

Aggarwal argued in 2023 that India’s aviation market could grow five- to six-fold over the following decades.

He referred to approximately 200 million passengers in 2019 and said India could eventually exceed one billion passengers.

That was an industry projection rather than a guaranteed outcome.

The forecast reflected the combination of demographic growth, rising incomes, infrastructure expansion and improving connectivity.

Whether the market reaches such a level depends on many variables, including aircraft availability, airport capacity, ticket prices, airline financial health and the pace of economic expansion.

International aviation represents another major opportunity

India’s domestic aviation market is already large, but industry leaders also highlighted the country’s international potential.

Aggarwal divided the broader market into three segments:

Domestic travel.

Short-haul international travel.

Long-haul international travel.

He argued that India had developed relatively strongly in the first two categories but still had considerable room to expand in long-haul international aviation.

According to the figures cited at the event, approximately 20 million of the roughly 200 million passengers travelling to and from India at the time were associated with long-haul travel.

The relatively smaller share was presented as evidence of an opportunity for airlines to expand international connectivity.

Air India’s privatisation was expected to unlock growth

The return of Air India to the Tata Group was another important element in the industry’s outlook.

Aggarwal argued that the privatisation had created an opportunity to address parts of India’s international aviation market that had remained relatively underdeveloped.

A stronger national airline group can potentially provide greater capacity on long-distance international routes while also building a larger network connecting Indian cities to overseas hubs.

The impact of that strategy depends on fleet acquisition, route economics, airport infrastructure and the ability to compete with foreign carriers.

IndiGo sees a major opportunity beyond India’s borders

IndiGo CEO Pieter Elbers also emphasised the growth potential of international travel from India.

He pointed to planned or newly announced routes connecting Mumbai with Jakarta and Nairobi as examples of the airline’s effort to expand its international network.

The strategy reflects a broader transition for IndiGo.

The airline was historically known primarily for domestic operations, but the growing international demand from Indian travellers provides another avenue for expansion.

IndiGo’s 500-aircraft order underlined long-term ambitions

The airline’s fleet strategy was another strong indicator of its ambitions.

In June 2023, IndiGo announced a firm order for 500 narrow-body Airbus aircraft, described at the time as the largest single aircraft order placed with Airbus by an airline.

The purchase was an unusually large long-term commitment to fleet expansion.

IndiGo was already operating more than 300 aircraft at the time and had stated an ambition to roughly double its fleet by the end of the decade.

A fleet of that scale can support both domestic growth and a substantially larger short- and medium-haul international network.

IATA also saw India rising in global aviation

IATA’s Amitabh Khosla said the organisation’s long-term passenger forecasts pointed to India becoming the third-largest global aviation market during the decade.

He described the milestone as an important indicator of where the country’s aviation sector was heading.

The significance goes beyond rankings.

A larger aviation market can support more airlines, airports, travel companies, hotels, logistics providers and aviation-service businesses.

It can also improve connectivity between India’s cities and international markets.

Asia is driving much of global aviation growth

Khosla also placed India’s expansion in a wider Asian context.

He noted that a majority of countries appearing among the world’s largest travel markets were located in Asia, illustrating the region’s importance to global aviation demand.

The broader trend includes rising incomes, urbanisation, expanding middle classes and increasing international mobility across multiple Asian economies.

India’s growth is therefore part of a much larger regional shift.

Infrastructure remained a short-term constraint

The optimistic long-term outlook did not mean the industry was free of challenges.

Khosla highlighted several near-term constraints, including:

• Airport infrastructure limitations
• Aircraft and equipment supply
• Supply-chain disruptions
• Workforce shortages
• The loss of aviation workers during the pandemic

The COVID-19 crisis led many employees to leave the aviation sector, while supply-chain disruptions created difficulties for airlines and manufacturers.

Those constraints can limit growth even when passenger demand is strong.

The industry’s challenge is therefore to expand capacity fast enough to match rising demand.

Aircraft supply is crucial to India’s aviation expansion

Demand alone cannot create new flights.

Airlines need aircraft, pilots, engineers, cabin crew, airport slots and maintenance capacity.

Global aircraft supply-chain problems were already creating challenges for carriers when the 2023 conference took place.

For India, this issue was especially important because domestic passenger demand was recovering rapidly.

Large aircraft orders from carriers such as IndiGo and Air India were therefore not only commercial decisions. They were also part of the industry’s effort to build capacity for future traffic.

Tourism and aviation are closely connected

The conference in Colombo also highlighted the relationship between aviation and tourism.

A country with better air connectivity can attract more international visitors and make domestic travel easier.

Tourism growth can, in turn, increase demand for airline seats, hotels, restaurants, local transport and entertainment.

For India, the relationship works in both directions.

A larger domestic aviation network makes more Indian destinations accessible, while growing tourism creates additional reasons for airlines to add routes.

The same principle applies internationally.

SriLankan Airlines sees opportunities in India’s growth

SriLankan Airlines CEO Richard Nuttall discussed the opportunities created by India’s expanding aviation market from the perspective of a neighbouring country’s carrier.

Sri Lanka has long depended on tourism and international air connectivity, and the country’s aviation industry was also rebuilding following the pandemic.

Nuttall said SriLankan Airlines aimed to return toward its pre-COVID position while expanding airport capacity.

Sri Lanka also planned airport expansion

Nuttall said Sri Lanka was working to restart construction of a new airport terminal, with the existing facility facing capacity constraints.

The proposed terminal was described as potentially being about twice the size of the existing facility.

For Sri Lanka, additional aviation capacity would support both tourism recovery and the country’s wider international connectivity.

The comments also illustrate the regional effect of India’s aviation growth.

As Indian passengers travel more often, nearby destinations such as Sri Lanka can potentially benefit through increased leisure and business traffic.

The post-pandemic aviation recovery was gaining momentum

The industry discussion took place after an exceptionally difficult period.

The pandemic caused passenger numbers to collapse and disrupted airlines, airports, travel agencies and tourism businesses around the world.

By 2023, however, passenger demand was recovering and airlines were rebuilding capacity.

India was among the markets where domestic aviation showed strong resilience.

The industry’s challenge was no longer simply reopening.

It was building enough infrastructure and capacity to support the next phase of growth.

India’s domestic market is only part of the story

India’s huge population naturally makes domestic aviation a major opportunity.

But the industry’s longer-term potential extends beyond domestic routes.

Short-haul international markets connecting India with the Middle East, Southeast Asia and nearby countries provide further growth opportunities.

Long-haul connectivity presents another significant opportunity.

Indian airlines have historically faced strong competition from foreign carriers at international airports, particularly on long-distance routes.

Expanding domestic airline fleets and improving airport infrastructure could gradually strengthen India’s ability to capture more of that traffic.

What could unlock the next phase of growth?

The experts’ comments point to several requirements for the industry.

More aircraft: Airlines need enough planes to expand routes and frequencies.

Better airports: Additional runway and terminal capacity is necessary as passenger numbers rise.

Skilled workers: Pilots, engineers, cabin crew and other specialists must be available in sufficient numbers.

Strong airline economics: Carriers need sustainable business models to support long-term fleet investment.

International connectivity: India’s aviation opportunity extends well beyond domestic routes.

Travel demand: Rising incomes and a growing middle class need to translate into actual passenger growth.

India’s aviation opportunity is structural, not just cyclical

The industry leaders’ optimism was based on structural factors rather than simply the post-pandemic rebound.

India’s population, urbanisation, income growth and relatively low air-travel penetration provide a large potential customer base.

Infrastructure investment is increasing capacity.

Airlines are placing unusually large aircraft orders.

And India’s international aviation ambitions are expanding.

Those trends can reinforce each other.

More aircraft allow more routes. More routes improve connectivity. Better connectivity can encourage travel. Rising travel demand can justify further investment.

The long-term outlook remains dependent on execution

India’s aviation opportunity is substantial, but turning potential into sustained growth requires execution.

Airports need to open and expand on schedule.

Aircraft deliveries need to keep pace with airline plans.

Training pipelines need to produce sufficient aviation professionals.

Airlines must maintain financial discipline while expanding.

And passenger growth must remain strong enough to support the additional capacity.

The industry’s 2023 forecasts were therefore best understood as a roadmap of potential rather than a guarantee.

Why India’s aviation sector attracted so much attention

The discussion in Colombo captured a broader transformation underway in Indian aviation.

The country was moving from being a large aviation market with relatively low penetration toward becoming a market with much greater domestic and international capacity.

India’s young population, expanding middle class, low air-travel penetration, new airport infrastructure and large airline fleet orders were all identified as drivers of that transition.

The next stage would depend on whether the industry could overcome its supply-side constraints and convert those structural advantages into sustained passenger growth.

For airlines, airports and tourism businesses alike, the central opportunity is clear: India’s aviation market has a very large potential customer base, and much of that potential had yet to be fully converted into regular air travel.