How will Indian Airlines overcome financial challenges amid increasing demand?

According to a report by CAPA India, Indian airlines are expected to incur a significant industry-wide loss in fiscal year 2025. The estimated losses for the year ending March 2025 are between $400 million to $600 million, compared to the previous year's reported loss of $300 million to $400 million. Despite the rising demand and increased ticket prices, escalating costs are projected to contribute to larger losses for the airlines in fiscal 2025.

The report indicates that overall airline costs are expected to rise by 3.8% in fiscal year 2025.

The Indian aviation market is currently the fastest-growing in the world leading to a capacity crunch as demand outpaces available aircraft. This has resulted in record yields for the industry as carriers charge higher fares due to the capacity crunch, leading to higher passenger load factors.

While the trend of record yields is expected to continue in the short term with approximately a 1% rise projected for fiscal 2025, the addition of 84 aircraft in the current year is anticipated to ease the capacity crunch. Consequently, the airlines' overall fleet size, including grounded jets, is expected to increase to 812 from 728 as of March.

The report also notes that the Indian aviation industry is dominated by low-cost carrier IndiGo, which holds a 60% market share. The Air India group, comprising two budget carriers and two full-service carriers, holds approximately 30% share of the market. Additionally, both IndiGo and the Air India group have over a thousand aircraft on order from Airbus and Boeing.

CAPA India estimates that domestic passenger traffic will grow from 161 million to 164 million, up from about 154 million, while international traffic is projected to increase from 75 million to 78 million.