The closure of Russian airspace has undoubtedly hurt global connectivity, with airlines forced to take longer routes or ax flights altogether. The US-India market has been feeling acute, with routes halted and new ones on hold indefinitely. However, not all airlines have been affected equally, with Air India seizing on United and American Airlines' overflight limitations.

US carriers rapidly losing market share

A new analysis from the Yale School of Management shows the impact of Russian overflight restrictions. In 2019, 5.8 million passengers made their way between the US and India, making it the 7th largest for the former. Given this, US airlines made a concerted effort during the pandemic to introduce new routes and take advantage of missing capacity. However, these gains have been largely halted in the last six months.

In January 2022, United and American accounted for 55% of monthly departures from the US to India. This month, the figure has plummeted to 38%, handing Air India a 62% market share. The drop has been caused by United halting its Delhi-San Francisco and Mumbai-Newark services, giving AI a monopoly on flights. These cancelations are due to US airlines being unable to fly over Russian airspace, making long-haul flights impossible. Air India, by comparison, is not covered by the sanctions and is planning to dramatically increase North American capacity in the next few months.

Booking data reflects this drop in flights. On nonstop flights, US carriers went from 52% of bookings in January to 33% in June, with Air India rising to 67% at the same time. Passengers have also adjusted for the additional time and disruptions on American carriers. On the New York-Delhi route, Air India has seen its share rise from 30% in February to a whopping 41.5% in June despite no drop in capacity. However, United and American have been forced to add 1 hour and 30 minutes of flight time to skip Russian skies, which has caused long diversions at times too.

Shift in the market

While Air India has managed to secure a large chunk of the nonstop market, the overall picture is different. The Middle East Three (ME3) have maintained their dominance, with a 40% market share in June, followed closely at 31.6% by 'Others,' primarily consisting of European giants like Lufthansa, British Airways, and Air France-KLM. The timing of overflight restrictions has hit US carriers even harder since India reopened scheduled international flights just a month later, allowing for more competition.

US airlines have slipped from seeing 26% of booking traffic to just 11.4% in three months after Russia's invasion. The combination of fewer flights, higher fares, and disruptions mean carriers have been forced to hit the brakes on any more routes. In February, United commanded 18.1% of bookings, which stood at 5.2% in June, while American has fared better with its one route, falling from 6.5% to 5.2%.

However, not all traffic is the same, and not all have shifted from United/American to Air India. Premium cabin passengers (first and business class) have moved to European airlines more recently, with AI's share remaining largely unchanged since February. Air India's aging infrastructure and lack of WiFi could be some reasons for the switch, although high fares are likely the biggest motivator for any swap. On New York-Delhi, premium passengers have continued to favor United and American's longer flight times over Air India, with the US airlines only losing share to one-stop connections and not Air India.

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Air India is seizing the chance

In January, Air India officially became a private airline under the leadership of the Tata Group. The breath of fresh air has seen the carrier quickly taking stock of the situation and expanding in key markets, like the US. To maximize the current opportunities, and the general market trend, Air India is planning to lease ex-Delta Boeing 777s to up capacity in the US. This would be a major win for the flag carrier, which will get Delta's latest cabin configuration (Delta One included) and the chance to reach several new destinations.

What do you think about the shift in the US-India market? Let us know in the comments!

Source: Competitive Impact of Overflights by Jeffrey Sonnenfeld for the Yale School of Management