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Sky-High or Grounded? The Future of Indian Aviation 🧑‍✈️

Updated: Feb 21, 2023

Air India placed the largest-ever-single-order of planes in the history of global aviation - a whopping 840 aircraft. The Maharaja’s grand return at the helm of Tata’s marks a never-seen-before opportunity in the Indian aviation space.

Add to this the government’s grand plan of building 220 airports by 2025 (from 140 at present), and expected growth in Indian air passengers from 27 crore in 2022 to 30 crore in 2025, and this definitely comes out as one of the top-growing sectors in India and globally.

But can you make money out of it by investing in airline stocks? That’s a big NO! In fact, Indian airlines don't make money when the industry is seeing ballistic growth.

  • A large number of new airlines pop up during high-growth phases

  • Increased supply and stiff competition lead to pricing pressure

  • Profitability drops massively, and several airlines shut shop

  • Winners from the consolidation make money only when other airlines start dying

💡In short, investing in winning airlines when the industry is consolidating is a better way of making money than investing in airlines when the industry is growing

Don't believe us? Here’s a 20-year history proving this two times over!

Sr. No.

Time Period


Passenger Growth

Aircraft Growth

Airline Deaths/Births


Oil Price Movement







































Phase 0 - Opportunity (2000-2003)

Number of airlines: 5

Airlines: Air India, Indian Airlines, Alliance Air, Jet Airways, Sahara

  • This period was governed by national carriers and Jet Airways, with the latter being the preferred choice due to better customer service, and luxury personified by Jet Airways

  • The market needed more airlines that did what Jet Airways did, paving the way for further privatise players

💡National carriers ruled; Jet’s success paved way for private players

Phase 1 - Growth (2004-2008)

Number of airlines: 12 (+8)

Airlines: Jet Airways, Air India, Indian Airlines, Sahara, Alliance Air, Air Deccan, Air India Express, Paramount Airways, SpiceJet, Go Air, Indigo, Jet Lite, Kingfisher

With a clear need for more private players, and the success of Jet Airways, the market saw the entry of six new players - Air Deccan, Paramount Airways, SpiceJet, Go Air, Indigo and Kingfisher

  • Kingfisher came in with a bang, playing the luxury card with its exquisite menu and its glam-filled staff, competing head-on with Jet Airways

  • However, with the entry of so many players, however, price wars commenced for gaining and maintaining market share. But to afford low prices, airlines had to also operate on low costs, giving birth to Low-Cost Carriers, especially when oil prices were skyrocketing

  • While Jet started to lose market share to Kingfisher and LCCs, it also attempted to enter the low-cost space by rebranding Sahara, which it had acquired. Kingfisher had also attempted a similar dive by acquiring Air Deccan

💡 Competition amongst private players intensified with the entry of several new players. Full-service airlines burnt money, and LCCs struggled to stay afloat, leaving little room for anyone to thrive despite the high growth.

Phase 2 - Consolidation (2009-2013)

Number of airlines: 8 (-4)

Airlines: Jet Airways, Air India, Indian Airlines, Alliance Air, Air India Express, Paramount Airways, SpiceJet, Go Air, Indigo, Jet Lite, Kingfisher, Air Deccan

  • High running costs, increasing oil prices, and aggressive pricing by LCCs resulted in a shutdown of Paramount Airways and the debt-laden Kingfisher

  • The death of Kingfisher (and others) however made room for existing players to spread their wings - with Jet being the sole high-end player, and Indigo taking the mantle as the leading LCC of the nation

  • LCCs gained a massive market share during this period (2009-13) - with Indigo going from 14% to 30%, Spicejet from 12% to 15%, and Go Air from 6% to 10%. Together the three went from 32% market share to 55% in a span of just 5 years

  • The death of Kingfisher and others worked extremely well for Jet Airways - the stock rose by 37% from 2009 to 2013, and for Indigo, which became a market leader

💡 Competition was so high that airlines weren't even able to pass on the increase in oil prices to passengers. The shutdown of airlines worked well for Jet Airways (clearing out of competition) and Indigo, which turned out to be the new market leader using its low-cost proposition.

Phase 3 - Growth (2014-2018)

Number of airlines: 15 (+7)

Airlines: Jet Airways, Air India, Alliance Air, Air India Express, SpiceJet, Go Air, Indigo, Jet Lite, Air Costa, Air Asia, Vistara, Trujet, Zoom Air, Air Deccan, Air Odisha

  • The dynamics for the Indian airline industry looked very lucrative. In a span of 5 years, when oil prices declined by ~50%, RPK was up by >50%. Pricing power had fallen into the hands of LCCs and they were truly milking it

  • From 2014 to 2017, investors had made a 3x return on Jet Airways, a 10x return on SpiceJet and Indigo had gotten listed and made investors a 50% return in just 2 years

  • However, attractive industry dynamics attract competition. The success of LCCs encouraged the entry of several new players - some international and some regional

  • The Tata’s started playing on their longstanding aviation dream and made an entry through Air Asia and Vistara. And, several regional players too entered - Air Costa and TruJet focused on the South, Zoom Air was based in the North, and Air Odisha in the East

  • However, by the end of this period, only the OG LCCs thrived. Despite being the sole classy airline, Jet Airways struggled. The success of LCCs and pricing pressure made it take on massive debt

💡 Although this was a very lucrative period for the industry, by the end of it, overcrowding and increasing competition had started to darken the skies for the industry. You must get the drift of what happens next - consolidation!

Phase 4 - Consolidation (2019-2021)

Number of airlines: 10 (-7)

Airlines: Jet Airways, Air India, Alliance Air, Air India Express, SpiceJet, Go Air, Indigo, Jet Lite, Air Costa, Air Asia, Vistara, Trujet, Zoom Air, Air Deccan, Air Odisha, Air Heritage, Star Air

  • This phase saw the final collapse of Jet Airways as it couldn’t continue functioning under the burden of debt it had incurred to run the loss-making airline, paving the runway for Indigo to completely take over the domestic aviation market as the preferred choice

  • Most of the regional airlines too couldn't survive in the highly competitive and crowded space, eventually shutting down

  • The only ones to make it through the phases were national carriers and new entrants with deep pockets and LCCs

💡 With several players shutting down, Indigo further gathered market share, reaching 40% by the end of 2021. The only winner in this consolidation phase was Indigo - also the most lucrative bet for an investor.

Phase 5 - Growth (2022-2025)

Number of Airlines: 11 (+4)

Airlines: Air India (combined with Air India Express, Air Asia and Vistara), Alliance Air, SpiceJet, Go Air, Indigo, Truejet, Star Air, FlyBig, Akasa Air, Jet Airways, Fly91

  • The government has been going big on the airline industry, opening up 80 new airports by 2025

  • With the nationalised carrier now taken over by Tata, this is the first time that the industry is 100% privatised, levelling the playing field and competitive stance

  • Additionally, several new players like Akasa Air, FlyBig, and Fly91 are getting added; and old-timers like Jet Airways and Air Deccan are making a comeback

  • Even LCCs like Go Air and SpiceJet are getting flushed with additional money - the former through an IPO, and the latter by hiving its cargo business off

💡 With so many players launching and adding capacity, total aircraft are expected to go from 700 currently to 900 by 2025. But with demand growth being lower than supply growth, and competition being intense, there is little reason to believe anyone will make money in this phase.

Clear Skies Ahead?

Whenever supply exceeds demand growth, the industry goes into a consolidation phase.

With so many players trying to make a mark on the industry, the next few years are going to be marked by a hyper-expansion phase.

These phases, historically (2004-08 and 2014-18) have also seen price wars and a fight for survival, where the industry suffers in terms of profitability.

After all, the consumer only cares about one thing - price.

To truly crack open the demographic that currently relies on air-conditioned trains for inter-state journies, slashed prices will be the only incentive to make that transition to flying.

And low pricing is what makes survival tough, and leads to excess flab getting cut, eventually making way for the thriving of the ones that have survived.

While the sector makes headlines for large orders, new airports, and new entrants, is it a good time to invest in airline stocks? No!

We’d rather wait it out while airlines fight amongst themselves, and back a potential winner at that time. The airline industry definitely looks like a “wait and watch” situation and placing your money into it could not be as “mile-high” esque as you think!

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