April 4th, 2011
09:35 AM GMT
India’s aviation industry is taking off again. Between 2009 and 2010 domestic passenger traffic grew 19% - an impressive figure considering the 2008 global financial meltdown that led airlines around the world, including those in India, to ask for government bailouts.
“I have never seen such a dramatic change in the market character in such a short span of time,” analyst Kapil Kaul, who runs the Center for Asia Pacific Aviation, said.
He notes that less than 2% of India’s 1.2 billion population travels by air, which points to massive potential for growth.
Over the last five years, the industry has expanded, but it hasn’t been profitable, he said. But he thinks that will change and foresees a future of sustainable growth and profit making.
So far the big winners have been the low-cost carriers.
One of the newest to take off in India has been 5-year-old no-frills carrier IndiGo, which has climbed to the top of the pack.
Its kitschy advertisements, reputation for good customer service and low fares are making a mark on the industry.
The financial meltdown took a heavy toll on the global aviation business. But the Indian industry didn’t experience a “dramatic fall,” said IndiGo President Aditya Ghosh. "In the worst year in the aviation business ever India only dipped 5%,” he told CNN. “Now in that same year we grew by 46% in India. IndiGo grew by 46%.”
How did IndiGo manage that? One factor is that “we kept consistently bringing aircraft in,” Ghosh said.
IndiGo Airlines made history this year with the single largest aircraft deal in global history. The company made an order for 180 aircraft worth more than $15 billion.
IndiGo will need those planes if it continues to grow the way it has. This year the Indian government gave the company the go-ahead to start international service. Airlines in India are required to operate in the country for five years before being allowed to start flying internationally.
But growth certainly has its limits in India, where airlines contend with some of the world’s highest fuel taxes, insufficient infrastructure and a massive bureaucracy.
“While we were constructing this airport, we had to contend with 58 government departments. During this period, we had to contend with 100 court cases to take care of encroachments in this area,” said Aniruddha Ganguly.
Ganguly is the group head of business integration for GMR Group, the company that built Delhi Airport’s new $1.3 billion Terminal 3. He says the terminal was built on time despite the roadblocks.
“I would say that the country over the years has learnt the art of overcoming obstacles,” Ganguly said.
IndiGo’s Ghosh says the opportunities outweigh the challenges.
“Either I could work in another part of the world where fuel taxes are low and there are more efficiencies in some sectors but there is hardly any growth, or work in India where there is a 15% to 20% growth in passenger numbers every year and for the foreseeable future.”
Analysts say in the next decade India will need three times the number of airports that it has today. Since it doesn’t have enough skilled labor to build them or pilots to fly the planes, people with the right skills in developed nations with wilting economies may want to look east for opportunities.
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