India’s largest airline, IndiGo, held its fourth quarter and fiscal year results call this week. While the substantial loss of 8.73 billion rupees ($115m) was to be expected, the general mood in the call was surprisingly upbeat. IndiGo’s CEO, Ronojoy Dutta, was positive about the future, and thinks that Indian aviation is in a great position to recover from the crisis.
Although IndiGo is striving for a fast recovery, it’s under no illusion that there’s a steep hill to climb before it will get back to where it was. During this week’s results call, CEO of IndiGo, Ronojoy Dutta, explained the current situation, saying,
“There’s a lot of dampening effect at the moment … the economy is weak, so even if the customers are willing to travel, the economy is depressing the demand. And then there are restrictions, and all those things are hugely dampening for the traffic, so clearly, we have to work our way through that.”
However, he remained positive about a swift recovery, and explained how he believes India is in a strong position to come out of the crisis.
India is unique
During the call, Dutta alluded to the uniqueness of India, and the prevalence of Indians to travel. He noted the huge number of people doing what is known as ‘visiting friends and relatives’ travel, or VFR trips. These are often regarded separately in airline traffic data from those which are purely vacations and those which are for business purposes.
Dutta explained how India’s high volumes of VFR traffic would help Indian aviation recover more quickly. He said,
“What is the longer-term sustainability of the airline traffic? India is sort of, I wouldn’t say unique, but an outlier in terms of the VFR traffic. Indians have family everywhere, and they’re like, ‘hey, I don’t care if I die. I want to visit my sister’ or whatever.
“We have a very strong VFR component. People will travel and go to their cousin’s wedding, so I think that VFR traffic distinguishes India from other markets.”
According to a Ministry of External Affairs report, there are 32 million Indian people, including persons of Indian origin, non-resident Indians and overseas Indians, living outside of India. The United Nations says that India is the largest country of origin of international migrants, with 17.5 million permanently resident outside of the country.
The high number of Indians living overseas makes for a high demand for travel, as those people return to India to visit their families, or families travel abroad to visit their ex-pat loved ones. Family is incredibly important in Indian culture so that demand is unlikely to go away, regardless of the impact of COVID.
What about domestic travel in India?
While there’s certainly a lot of demand for international travel, far more Indians travel domestically than leave the country. According to Statista, more than a billion Indian nationals have traveled within the country since 2012, compared to around 150 million internationally.
With over 71,000 miles (115,000 km) of rail track and more than 7,000 stations across the country, rail has long been the preferred mode of transport for domestic travel in India. However, the Ministry of Railways has already projected that domestic airlines will supersede trains and become the number one choice of domestic transport. This includes on shorter segments of under 500 km, which was always where rail held a monopoly.
Holding approximately 40% of the market share for domestic Indian flights, IndiGo knows its audience well. Dutta remains upbeat that, even with the disruption of COVID, air will continue to steal passengers away from the trains. He said,
“There is a huge amount of rail track. We’ve always said Southwest [Airlines] took people out of cars. IndiGo will take people out of railways to visit their friends and family.”
A swift recovery in the domestic market is going to be crucial for IndiGo and other Indian airlines. There’s still no word on when international will resume, and even when India lifts its ban, it will require other nations around the world to lift theirs too before traffic can really begin to pick up. Dutta remains positive that there is a good outlook for India, saying,
“Longer term, we think that as the economy recovers, as the fear factor goes down, as the VFR traffic maintains, there’s great potential for India.”
What do you think? Will Indian aviation recover well? Let us know in the comments.