Aviation scene bright but Indian airlines struggle

The global aviation industry has witnessed an improvement in financial performance but the airlines in India have not yet been able to match this recent surge, a report by International Air Transport Association (IATA) has said.

The report also said aviation in India is expected to grow 6.1% per year on average and the number of annual air passenger journeys is forecast to increase by more than 350 million over the period, moving to almost 520 million journeys in 2037.

Except for IndiGo and GoAir, the report said, most airlines have struggled to consistently generate a net profit after tax in the past three years while the global scenario has witnessed a turnaround.

In its report "India's Air Transport Sector: The Future is Bright But Not Without its Challenges" released at the recent International Aviation Summit in New Delhi, the IATA said the global air transport industry historically has struggled to generate consistent profits and even in periods of strong demand, profitability has proven to be elusive.

"The last three years – and we expect 2018 to be the fourth – have seen a turnaround in this situation at the global, industry-wide level. The industry is now generating returns which exceed its cost of capital, and delivering a net profit figure of around $ 30 billion per year," it said.

"Unfortunately, for the most part, the airlines in India have not yet been able to match this recent improvement in the industry-wide financial performance...most airlines have struggled to consistently generate a net profit after tax, the main exception being IndiGo who, along with GoAir, are the only airlines to have generated profits in each year," it said.

The report said the aviation industry in India is "not yet on a sound financial footing" and this "remains a work-in-progress" for the sector and its key stakeholders, including policy-makers. "While the industry has demonstrated resilience in the face of various shocks and disruption, including the global financial crisis and airline exits, financial stability is a key factor for the industry to be able to successfully develop and grow," it said.

On the growth potential of the sector in the country, it said the strong performance of air passenger demand growth has not been confined to just the past few years. The total number of fliers has more than doubled over the past seven years, from a level of 79 million journeys undertaken in 2010.

"From flying just 16 million passengers 20 years ago, Indian airlines have seen their passenger volumes increase more than 8-fold in the period since. Along the way, India has overtaken a host of countries, including Germany and Japan, in the process," the report said.