Air India aims to double international transit traffic in next 3 years
Air India’s Chief Commercial Officer (CCO) Nipun Aggarwal stated that currently Air India’s total international passengers close to 10 percent use Indian airports as transit hubs. Annually, around 130 million passengers fly over India. In this, the transit traffic of about 10 percent and 7.5 percent is handled by Dubai and Doha, respectively. Compared to this, Delhi handles less than 1 percent of this transit traffic in current times. According to Aggrawal, this could act as a significant growth opportunity. Air India’s total international traffic is expected to grow by 15 percent to 20 percent in the next three years. This is Air India’s aspiration and commitment to achieve the goal.
Expansion plan of international transit traffic
Aggrawal states that the airline has already increased its transit traffic to the west and now it is time to increase the connectivity in the east of India as well. With a particular focus on Southeast Asia to attract more international-to-international (I2I) traffic.
He further states that Indian airlines have largely failed to notice the unexplored potential in the Europe-Australia corridor. Air India has adjusted their flight schedules to ensure smooth and convenient connectivity of Western destinations such as Frankfurt, Paris, London with Eastern destinations such as Melbourne and Sydney.
Rebuilding Widebody planes
Since the year 2019 -20, Air India’s business class and premium economy cabins have recorded an increase in revenue by 2.3 times. While, the revenue generation of the economy class has recorded an increase by 1.6 times. By taking into consideration the category-wise revenue generation, the company plans to increase the number of seats in business as well as premium economy cabins which is also known as front-cabins in its widebody planes. Once the upgrade is finished, the number of front-cabin seats available will be doubled compared to the present number of seats available. Also, the revenue will also increase from these planes. The airline plans to start rebuilding of widebody planes by the month of July.
Expansion plans of Direct Flights
Air India has repeatedly rejected increasing bilateral rights with countries such as Qatar and UAE. It believes that these countries’ airlines use their hubs to carry a significant share of traffic from India to countries in North America and Europe. Also, the current bilateral rights of India with Dubai and Doha hubs is more than sufficient fr the purpose of origin-destination (point-to-point) traffic.
In the near future, Air India intends to increase its shares in traffic by increasing direct flights to North America and European countries. The company understands that in order to achieve a big share of the international market, there is a need to strengthen Delhi and Mumbai hubs.
Wet Leasing planes
Wet Leasing planes refers to not only leasing aircraft but also its crew, insurance and maintenance unlike dry leasing which only allows renting aircraft. In the month of December 2024, the government of India allowed airlines to wet lease planes on new routes. It was started to satisfy the rising demand and to give a temporary solution to slow deliveries of new aircrafts. The CCO of Air India stated that the company is not involved in wet leasing.
The reason for not using wet leasing planes is due to its operational challenges associated with it, particularly occurring while creating a sustainable flight network. The wet leasing method is quite useful in times of sudden rise in demand. Air India’s purpose is not at present to satisfy this current surge in demand but to focus on long-term growth. The company has already put orders for new planes.
Sales Channels of Air India
Air India’s website or app contributes to 20 percent of its international ticket sales. While, the domestic sales channels contribute to 40 percent of sales and the remaining sales of Air India’s international ticket is carried through foreign sales channels. It is difficult to identify a strategy to increase sales through foreign sales channels as it changes market to market. Also, the company focuses on maximising returns and not on focusing on one particular sales channel and its revenue.
Impact of Rupee depreciation
The current rupee depreciation has significantly burdened the cost structure of Air India. The reason for that is the company’s many expenses are done in dollar-denomination except employee related expenditure.
Due to its presence in operating many international flights and also charging in foreign currencies give it a somewhat natural protection from currency fluctuation. Despite this, it is facing challenges in profitability and fares due to around half of the tickets being sold in Indian currency. Also, depreciation of currency not only affects fares prices but also demand. This challenge is faced by the entire Indian aviation industry. Air India is taking efforts to resolve this issue by increasing productivity and also implementing measures to ensure efficiency in operations.
The image added is for representation purposes only
