Premiumisation will be helped by Indians flying abroad. Post-pandemic, the international travel industry has become more dependent on Indian flyers to sustain future growth. The number of countries easing visa restrictions for Indians is climbing fast. This provides Indian airlines an opportunity to build premium capacity and move into the higher revenue-lower cost segment of the business. They will also try to counter the location and jet fuel cost advantages of Gulf carriers with originating traffic. The initial battles of what looks like a long war will be fought over competitive services and prices. If Indian carriers can reduce the dominance of their counterparts in the Gulf, they could look at the bigger prize of building international transit hubs to cater to traffic originating elsewhere in the Asia-Pacific.
There is growing evidence of a change in Indian consumer preference that airlines cannot ignore. The Indian aviation industry has received timely capital infusion with the privatisation of Air India that could permanently alter the market dynamics. A well-capitalised airline industry with visibility of strong traffic growth has begun seeking efficiencies by front-loading its fleet acquisition and by experimenting with cross-subsidisation.
