Thursday, 11 Sep, 2025
Do the declining numbers in domestic aviation traffic reflect the concerns expressed by some analysts that the revival in economic growth momentum is slowing down
On August 17, India Tracker published a story that attempted a data driven analysis of intensifying competition in the domestic aviation sector. The analysis was based on the fact that Akasa Air (founded by the recently deceased Rakesh Jhunjhunwala) has entered the fray along with the return of Jet Airways under a new management. A day later, the aviation sector regulator Directorate General of Civil Aviation released data that shows domestic air passenger traffic in July 2022 decline by about 7.6% compared to June. Even the numbers for June were considerably lower than the 2022 peak achieved in May. What has gone wrong? An even more important question, do the declining numbers in domestic aviation traffic reflect the concerns expressed by some analysts that the revival in economic growth momentum is slowing down.
If you look at the accompanying chart, the slowdown and decline is clearly visible. Thanks to fears of another Covid pandemic wave in January 2022, domestic air passenger traffic actually fell drastically to about 6.4 million in January, 2022. There was a steady improvement in numbers till May 2022 when traffic touched 1.2 million. This was almost equal to the pre-Covid level of 12.2 million in may 2019 and 11.8 million in May 2018. But since then, traffic has started falling, dropping below 10 million in July 2022. The DGCA says that the decline is temporary because air passenger traffic usually falls during the monsoon. But data doesn’t support the contention. In July 2019, domestic air traffic had grown at 3% in July 2019 to about 11.9 million compared to 11.55 million in July 2018. Any which way you look, the decline in July 2022 cannot be explained away by monsoon and related factors. Perhaps the real reason lies in extremely high airfares that has discouraged middle class Indians from flying. There has been a cap on domestic airfares because of the crisis caused by the Covid crisis that badly impacted the financial situation of airlines. However, the caps are to be removed with effect from September 1, 2022 and analysts expect that domestic airlines competing for market shares will announce a slew of low fare schemes and packages. In any case, the almost 59% market share enjoyed by Indigo in July this year is rationally high and will be inevitably challenged in the months to come. Jet Airways was the dominant player in the aviation sector when Air Deccan launched a low fare and no frills airline in 2003. Indigo launched a similar service in 2006 and now dominates the market. Who knows how long this dominance will last?
In the long run though, there can be no doubt that the aviation sector in India will grow at very healthy rates. For one, massive foreign direct and domestic investments in India across a spectrum will fuel business travel . Then, new airlines will inevitably launch a price war that will again middle class Indians to take to the skies. And finally, as per capita income keeps rising even assuming a GDP growth rate of 6% in the medium term, air travel is bound to grow at a healthy rate. The sky is the limit, as they say.
