“If you want to be a millionaire, start with a billion dollars and launch a new airline.”
— Richard Branson, founder of Virgin Atlantic
The quote might be cheeky, but it’s painfully true.
Aviation is a capital-hungry business with brutal economics. Margins are razor-thin, costs are volatile, and ambition alone rarely ensures survival. Just ask Jet Airways, Kingfisher, Go First, or Air Deccan — all once high-flying names that eventually ran out of runway.
Yet today, the trajectory seems unmistakably upward.
A record 16.5 crore Indians took to the skies in FY25. IndiGo has become the world’s most valuable airline, overtaking Delta. Air India is undergoing a historic transformation, placing an order for 470 aircraft, the largest in global aviation history at the time.
Travellers, too, are taking to the skies with a vengeance. What’s interesting is that the growth isn’t limited to metros. Tier 2, Tier 3, and regional hubs are fuelling the next phase — with upgraded terminals and expanded connectivity stitching together long-ignored parts of the map.
On the surface, this looks like a golden age for Indian aviation.
So what’s really powering this ascent — and what’s still holding it back?
In this edition, we unpack:
- The industry model
- The big two: inside the strategies of India’s aviation heavyweights
- The economics of add-ons: why non-ticket revenue matters
- Cleared for takeoff: the road to 2030 and beyond
Lets dive in.
The industry model
India is now the world’s third-largest — and fastest-growing — aviation market, valued at around $16 billion in FY25, and expected to grow to $41 billion by 2033.
Market concentration has intensified over the last two years. IndiGo holds more than 60% of the domestic market, while the Air India group, following its consolidation with Vistara and AirAsia India, controls another 25–27%, making the market a near-duopoly. The remaining capacity is split between smaller players like Akasa, SpiceJet, and regional carriers, many of whom operate on stretched balance sheets and limited fleets.
Passenger numbers are soaring, fleets are expanding, and new airports are coming online at record pace.
But aviation is a volume game with thin margins. Three metrics define the economics of flying: Yield, RASK, and CASK.
- Yield measures the average fare paid per passenger per kilometre — essentially, pricing power.
- RASK (Revenue per Available Seat Kilometre) captures how much revenue an airline earns across its entire seat capacity.
- CASK (Cost per Available Seat Kilometre) reflects how much it costs to operate each seat.
The difference between volume and margins is what determines profitability and managing that spread is central to the business.
And the biggest pressure point in that equation? Fuel.
If there’s one number that keeps Indian airline CEOs up at night, it’s the price of ATF (Aviation Turbine Fuel). It accounts for 35–40% of operating costs, one of the highest cost components globally. With state-level tax differences, currency volatility, and no pricing control, fuel remains the most unpredictable variable in the model — and often, the first to throw it off balance.
So when fuel spikes, the natural lever is pricing. With two carriers controlling most of the market, the ability to raise fares should, in theory, exist. But price sensitivity in India runs deep.
Take this: on the Delhi–Mumbai corridor — the nation’s busiest route and the 8th busiest in the world, with 100+ flights a day — the average fare in November 2012 was ₹5,392. More than a decade later, that fare has barely moved, even as fuel prices, crew salaries, and airport charges have more than doubled.
Most Indian carriers operate on a lean, low-cost model — built around high aircraft utilisation, dense seating configurations, and unbundled services. This means passengers pay separately for meals, baggage, and seat selection. The focus is on keeping fares low and volumes high but it comes at the cost of pricing power. Since fares can’t be raised easily, airlines fall back on capacity addition to drive revenue — adding more routes, more seats, and more aircraft to keep growing.
But all’s not well herein. Boeing and Airbus are struggling with production delays, battling part shortages and certification backlogs. Aircraft deliveries are running months behind schedule, straining airline planning cycles. In addition, Trump proposed 100% tariffs on planes and components imported from the European Union (EU), and the cost of fleet expansion may rise when airlines need it most.
According to ICRA, the Indian aviation industry is expected to post a ₹3,000 crore loss in FY26, despite surging passenger numbers — largely due to these supply chain disruptions and cost pressures.
In a statement last November, Air India CEO Campbell Wilson noted that the airline was forced to “recalibrate” its aggressive growth plans due to aircraft delivery delays and ongoing supply chain challenges, both of which slowed its transformation agenda. In March 2025, IndiGo’s Head of Planning, Abhijit DasGupta, noted that while the worst of aircraft groundings was behind them, supply chain issues would persist. He added that growth had been maintained through lease extensions and efficiency gains, but cautioned: “Supply chain problems will not go away tomorrow.”
It’s not just jets that are running behind — the talent pipeline is under pressure too.
India’s aviation growth is now also being constrained by a growing talent gap. The industry faces a projected shortfall of over 2,375 commercial pilots by 2029, even as aircraft orders accelerate. The MRO (maintenance, repair, overhaul) ecosystem is similarly stretched, with an acute shortage of licensed engineers, creating operational bottlenecks as fleet sizes expand.
On the infrastructure front, India’s aviation sector is no longer waiting to catch up — it’s already mid-flight. While metro airports continue to operate near capacity, Tier 2 and 3 cities are experiencing a quiet transformation: new terminals, expanded runways, and deeper network linkages. Since its launch in 2016, the Ude Desh ka Aam Nagrik (UDAN) scheme has brought 619 new routes online — connecting 88 underserved and unserved airports across India, including 13 heliports and 2 water aerodromes. Designed to make air travel accessible to the common citizen, UDAN has been a key driver in expanding regional connectivity.
The investment backing this shift is equally significant. Under the National Infrastructure Pipeline (NIP), ₹91,000 crore was earmarked for airport development between FY20 and FY25. As of December 2024, over ₹84,300 crore has already been deployed — a clear signal that capital and intent are aligning.
At the policy level, too, 2024 marked a turning point. A unified tax regime for Maintenance, Repair, and Overhaul (MRO) was introduced — lowering GST and making domestic aircraft servicing more cost-effective. For years, Indian carriers had been sending aircraft abroad for maintenance due to high local costs. This shift is expected to reduce that reliance, cut turnaround times, and build up India’s MRO ecosystem. Alongside this, upgrades to airspace surveillance systems and the passing of the Bharatiya Vayuyan Adhiniyam — a modernised aviation bill replacing older regulatory frameworks — have begun to strengthen the sector’s operating spine. The result: a space still tight on margins, but increasingly robust in structure and finally equipped to scale without strain.
A duopoly in the skies — and a bid for global relevance:
India’s aviation sector is now a two-horse race but the strategies couldn’t be more different.
IndiGo, long defined by its cost discipline and clockwork execution, has become India’s most formidable aviation success story.
IndiGo is one of the most efficient low-cost carriers globally, with a CASK — Cost per Available Seat Kilometre (excluding fuel and currency impact) — of just 3.37¢, lower than most U.S. and European peers, and a mark of tight operational control.
As of FY25, it operates 2,200+ daily flights, holds more than 60% of the domestic market, and runs one of the world’s youngest fleets.
Backed by a 900+ aircraft order book, IndiGo is shifting from a pure-play LCC to a more flexible model — adding business-class seating, pushing international routes, and building out ancillary revenue streams like cargoes and charters. The scale is unmatched: a new aircraft, every week, for the next decade.
Across the aisle is the Air India group, backed by the Tata Group and aiming for a full-service global revival. It has placed a 570-aircraft order, integrated operations with Vistara and AirAsia India, and is overhauling everything from lounges and cabin design to long-haul route strategy.
Still, being big in India isn’t enough — both carriers are now playing for global stakes.
Even as IndiGo and Air India expand aggressively, foreign airlines continue to lead on international routes — flying 28.05 million passengers in the first nine months of FY25, compared to 24.7 million by Indian carriers.
But the tide is turning. Indian airlines now hold 46% of international seat capacity, up from 39% in FY18 — a sharp signal that the gap is closing, and fast.
India is slowly redrawing the map. Bilateral rights are being liberalised, airport investments are rising, and the focus is shifting outward. Noida and Navi Mumbai are just the start — the real bet is on India becoming the link between West Asia and the Asia-Pacific. Not just flying through — but flying via.
The playbook isn’t new, but the scale is. Emirates, Qatar Airways, and Singapore Airlines built global networks from small home markets by becoming transit-optimised, high-frequency hubs. IndiGo and Air India are now attempting the same but with a far larger domestic base and a projected 160 million outbound travellers by 2030.
But cracking the global game won’t be easy. The hard part is matching the depth, reliability, and premium experience of global incumbents — and doing it at a competitive cost. Some would argue that in global aviation, gate slots at airports like JFK, Frankfurt, and Heathrow are the ultimate currency—on par with aircraft or capital.
In that sense, IndiGo and Air India aren’t just competing at home anymore. They’re going after the global giants — one with scale and cost discipline, the other with service and international depth. The next decade won’t just define Indian aviation. It might just reshape who connects Asia to the world.
New revenue altitudes: Beyond just tickets
In today’s aviation math, the ticket is just the entry point. The real value? It’s what comes after.
Ancillary revenues have now taken centre stage — airlines dynamically price baggage, meals, seat selection, priority boarding, check-in speed, lounge access, Wi-Fi, cancellation flexibility, travel insurance, and even early boarding privileges.
In a business where ticket prices swing, cargo offers steady returns. E-commerce demand and lean aircraft ops have turned it into a focused growth lever — now scaled with dedicated fleets and smarter route planning that consistently lifts overall yield per flight.
Then there’s the loyalty layer. Frequent flyer programs and co-branded credit cards have evolved into high-margin businesses- driving stickiness, diversifying revenue, and unlocking valuable customer insights. Loyalty is becoming productised. Air India’s new Maharaja Club unifies its group-wide frequent flyer base, while IndiGo is expanding its Blu Chip ecosystem through banks, retail partners, and digital wallets.
Tech is another growth vector. With Digi Yatra rolling out across major airports, the digital layer of travel is expanding — reducing friction, boosting efficiency, and opening monetisation opportunities.
On the green front, action is finally picking up: cleaner fleets, Sustainable Aviation Fuel (SAF) pilots, and ESG-linked reporting are now part of the execution plan.
And finally, the demand map is shifting. Tier 2 cities are fuelling a new wave of business travel — not just leisure. That’s changing route economics, fleet allocations, and how airlines think about yield per route.
The game is no longer just about flying. It’s about stacking, bundling, and capturing value across the journey. IndiGo, for instance, derived close to 10% of its total revenue from these services in FY24 and expects ancillary revenues to grow at a 30% CAGR between FY20 and FY26.
Cleared for takeoff: the road to 2030 and beyond
All the ingredients for an aviation boom are in place: rising income, explosive demand, better infrastructure, and serious fleet expansion. Passenger traffic is projected to more than double from ~240 million in FY25 to over 510 million by FY30. India will add hundreds of aircraft, new airports and capacity across terminals, tarmacs, and training schools.
And the headroom is undeniable. India’s domestic seat capacity per capita stands at just 0.13 — far behind peers like Vietnam (0.42), Brazil (0.56), and China (0.59), and nearly 24x lower than the US (3.09), signifying that even small shifts in capacity could translate into outsized growth.
In summary
India’s geographic advantage also makes the ambition to be a global connector credible. With 65% of the world’s population within 6 flying hours, the opportunity to rival Dubai or Singapore is on the table — if infrastructure, talent, and service delivery keep pace.
But ambition needs execution. And aviation has always been a fragile business — where fuel spikes, geopolitical shocks, or missteps in cost control can ground even the best-laid plans. If India gets this next phase right, it won’t just be a domestic success story. It’ll be a new centre of gravity in global aviation.
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