Air India sees a revenue goldmine in long-haul transit traffic
The airline sees next phase of revenue push coming from ferrying passengers from North America, Europe and other destinations to India, connecting them to other parts of Asia.
Air India Ltd sees a lucrative opportunity in international transit traffic by flying people from North America and Europe to Asian destinations through India, expanding its share of a market dominated by foreign airlines.
Many passengers currently prefer hubs such as Doha, Dubai, Istanbul and Singapore, chief commercial officer Nipun Aggarwal said, pointing to the need to strengthen domestic aviation hubs.
"We need to ensure that we can capture a greater flow of the different share of the connecting traffic, and this is what we are trying to do. Our share in long-haul traffic is very low, and this segment is more than 50% of the total market opportunity. Which is why we believe that we can grow at a very high growth rate for the next 10-15 years,” Aggarwal said at a media roundtable.
The airline said since the Tata Group acquired the airline in January 2022, passenger revenue has grown 1.6 times, cargo revenue 1.9 times and ancillary revenue 2.6 times.
According to Air India data, foreign airlines enjoy a market share of 80% in long-haul transit traffic, while Indian airlines have less than 15%.
Aggarwal added, “There is 60% of organic growth opportunity which is out there. Even if we don't do anything and just go with the market, we can grow 6-7% annually in this segment. So, there is an opportunity to gain market share and deploy much more capacity in the international market. So, we believe we have a lot of headroom for growth.”
Aviation expert and CEO of Avialaz Consultants Sanjay Lazar sees Air India's plans as a significant step for the airline's future. "Air India has tweaked the timings of its European and South Asian flights so as to create free flow of transit traffic from America and Europe to South Asia, Thailand and Australia. It will position Air India as the quickest one-stop airline from Europe to South Asia and Australia, through Delhi. These routes will attract a significant percentage of expats and leisure travellers where there is a large market.”
Financial performance
Air India has become a material business for the Tata Group, Aggarwal said. “Our revenues which were less than $1 billion in FY20 have grown to almost 10 times today. Our available seat kilometers (ASK) have grown almost six times today, and on top of this, we have a fleet order of almost 600 aircraft which will join us in the next 10 years. So, we have acquired size and scale and this is now a meaningful and material business for the group.”
He added, “There is almost 40% improvement in revenue per available seat kilometer (RASK) which we have been able to achieve through the various initiatives. The yields are quite strong and a combination of a benign market condition and the work that we have done is helping us to achieve almost two times the revenue.”
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First Published:13 Jan 2025, 05:30 AM IST
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