India’s Civil Aviation Sector: Growth Amid Systemic Stress

Context

India’s civil aviation sector has remained under strain over the past year, as a series of operational disruptions—beginning with the Ahmedabad crash in June 2025 and followed by large-scale flight cancellations and persistent delays—triggered widespread passenger dissatisfaction and highlighted systemic stress across the aviation value chain.

Present Landscape of India’s Aviation Industry

Global Standing – India has emerged as the third-largest domestic aviation market worldwide, with a fleet strength exceeding 840 aircraft.
Demand Surge – Annual passenger traffic has crossed 350 million, with projections indicating a sharp rise to around 715 million passengers by 2030.
Economic Expansion – The aviation market is expected to grow from $15 billion in 2025 to $25 billion by 2030, supported by a 15% year-on-year increase in passenger volumes.
Airport Infrastructure Growth – The number of operational airports has expanded from 74 in 2014 to about 163–164 by 2025–26, with long-term plans targeting 350–400 airports by 2047.
Regional Outreach – Improved air links to Tier-2 and Tier-3 cities have strengthened regional tourism, trade, and cargo connectivity.
Investment Framework – Liberal FDI norms permit 100% foreign investment in greenfield airports and 74% in brownfield projects, alongside 10-year tax exemptions for airport infrastructure.
Market Structure – Domestic aviation continues to be dominated by a two-player system, led by IndiGo and the Air India Group.
Entry of New Players – NOCs granted to Shankh Air, Al Hind Air, and FlyExpress aim to enhance regional connectivity, particularly under the UDAN programme, offering cautious optimism for diversification.

Operational and Human Resource Stress Points

Systemic Disruptions – Repeated breakdowns in 2025 revealed sector-wide fragilities rather than airline-specific failures.
Pilot Availability Gap – IndiGo’s pilot-to-aircraft ratio of around 14 remains below the global benchmark of 18–20, straining high-utilisation models.
Training Ecosystem Limits – Shortages of instructors, simulators, and high training costs have constrained pilot supply.
Rising Workforce Demand – Parliamentary estimates suggest a need for 7,000 pilots between 2024–26 and 25,000–30,000 over the next decade, while only ~5,700 CPLs were issued between 2020 and 2024.
Temporary Fixes – Airlines have resorted to hiring foreign pilots, with 236 temporary licences issued in 2025, a costly and unsustainable approach.
Regulatory Manpower Shortfall – Nearly half of DGCA’s technical posts remain vacant, even as fleet size and passenger volumes expand.
Crisis Management Approach – Regulatory responses have relied more on operational relaxations than strict enforcement, reflecting weak institutional capacity.

Market Concentration and Systemic Risk

High Concentration Levels – IndiGo accounts for 63–65% of domestic traffic, while the Air India Group holds 27–28%, together controlling nearly 90% of the market.
Capacity Shock Effects – Disruptions affecting dominant carriers reduce overall system capacity instead of redistributing passengers to competitors.
Route-Level Dependence – IndiGo operates as the sole airline on over 60% of domestic routes, making its operational health critical for national connectivity.
Challenges for New Entrants – Without structural reforms, new airlines risk inheriting existing inefficiencies rather than improving resilience.
Lessons from the Past – Failures of Kingfisher, Jet Airways, Go First, TruJet, Paramount Airways, and Vistara highlight persistent challenges such as high costs, weak regional demand, managerial lapses, and infrastructure constraints.

Cost, Safety, and Resilience Constraints

Fuel Price Exposure – Volatility in Aviation Turbine Fuel (ATF) prices, linked to global oil markets and the US dollar, continues to pressure airline finances.
Safety Oversight Issues – By late 2025, the DGCA issued 19 safety notices citing violations of flight duty norms, quality control lapses, and operational non-compliance.
Absence of Buffer Capacity – Unlike global airlines that maintain 20–25% spare crew capacity, Indian carriers operate at near-maximum utilisation, allowing small disruptions to escalate rapidly.

Way Forward

With India contributing around 4.2% of global air traffic and domestic demand set to nearly double by 2030, unresolved structural constraints could convert rapid growth into recurring instability.

For new airlines to survive and contribute meaningfully to market diversification, policy support beyond licensing will be essential.

Priority Interventions include stronger implementation of UDAN incentives, preferential slot allocation at congested hubs, coordinated development of regional airport infrastructure, and policy measures such as ATF tax rationalisation or fuel hedging mechanisms to cushion cost volatility.

Source : The Hindu