Robust traffic growth
South Asian air travel is expected to grow 8.6 percent per year over the next 20 years. Domestic travel, and travel between South Asia, the Middle East, and Southeast Asia, will account for the largest flows.
South Asia’s demographics are highly favorable to the growth of air transportation. The region has a large population (totaling 1.7 billion people in 2012), and the share of this population entering the workforce is growing. The region’s real GDP is forecast to grow an average 6.6 percent per year between 2012 and 2032, by the end of which period, India could have the world’s fourth-largest economy if current trends toward economic policy liberalization, market reform, and investment continue.
Consolidation and new allies
Having suffered large financial losses in recent years, Indian airlines moved toward more sound financial footing in 2013, with Kingfisher’s suspension of operations hailed as an opportunity for the surviving airlines to gain market share and raise fares.
Reform of foreign direct investment rules allowed foreign airlines to acquire up to 49 percent of an Indian airline, which quickly led Abu Dhabi’s Etihad Airways to acquire 24 percent of Jet Airways. This will provide much-needed funds for the Indian carrier and will have far-reaching implications for its network as traffic is shifted toward Abu Dhabi and away from other connecting airports. A new scissor-hub operation in the UAE is widely expected. This equity partnership continues to make its way through the Indian government agencies, having secured approval from some, while awaiting approval from others.
Also in 2013, AirAsia announced that it would partner with the Tata Group to launch a new low-cost airline. AirAsia would own 49 percent of the proposed airline, with Indian companies, the Tata Group and Telestra Tradeplace, controlling 51 percent of the venture. The new low-cost airline will mark the return of the Tata Group to the airline industry, some 60 years after the 1953 nationalization of Air India.