What the latest DGCA data reveals about Air India, its allied airlines and competitors

Soon after Campbell Wilson took over as Air India’s CEO and MD in July this year, the group set a target of achieving 30% market share over a period of five years. The target clearly indicated a merger between Vistara and Air India. Over the following weeks, Singapore Airlines group formally informed the local bourses about discussions for such a merger.

But as the regulator issued its market summary for October, it turns out that within India, the three Tata group airlines — Air India, Vistara and AirAsia India — have an aggregate market share of 25.9%. While the focus was on the traffic in October, which at 1.14 crore was a jump of 26.95% over October last year, there were many hidden undertones in the report, which could shape the way forward for the airline Industry in India

Air India and Vistara are neck to neck

The battle for the number two spot in Indian skies has been on for a while but within months of Vistara grabbing it, a new challenger has emerged in the form of Air India. While Vistara has been able to maintain the spot for 4 consecutive months, it could not breach the 10% mark as it did in July. Meanwhile, Air India has gained significantly and is now only 0.1% behind Vistara. In terms of absolute numbers, the difference is just 11,000 passengers.

While AirAsia India’s merger with Air India Express is to be completed by next November, there is no word on the Vistara-Air India merger, except that things are moving in that direction.

Rejuvenated AirAsia India

It appears the announcement about the Tata group taking over AirAsia India fully has rejuvenated the airline. There was a quantum jump in AirAsia India’s market share, which reached 7.6% from 5.9% a month earlier.

The jump of 1.7 percentage points means that the airline leapfrogged both SpiceJet and Go FIRST. At 7.6%, this is the highest market share for AirAsia India this year and its second-best ever.

Air India on time: Privatisation impact?

Air India had 90.8% of its flights at four metro airports being on time as compared to 87.5% for IndiGo. That performance by Air India is laudable since the airline was never known for being on time when it was under the government. Vistara and AirAsia India performed equally well, at 89.1%.

While this will help set the narrative for the Tata group airlines on the OTP On Time Performance) front, IndiGo has made significant changes to its network to ensure a better OTP level in the winter schedule.

And while IndiGo and the Tata group slug it out, the clear losers seem to be SpiceJet and Go FIRST, which have lost market share and remain below 70% in terms of OTP.

IndiGo’s load factor indicates strategy shift

SpiceJet continued to have the highest load factor, but there were some interesting insights here. IndiGo has not been pushing for a higher load factor for the last couple of months. In October, it ended with 82.1%, which was lower than Air India and Vistara, both full-service carriers (FSC). Traditionally, the low-cost carriers (LCC) have pushed for higher loads over FSCs, but IndiGo seems to have prioritised yields over load factors and more passengers.

But why? There are two ways to look at the revenue per flight: drop fares and add more passengers or carry fewer passengers with higher fares and enjoy a higher yield. If both strategies generate the same revenue, it makes sense to carry fewer passengers. Instead of dropping fares, IndiGo seems to be following this strategy, which enables quicker turnarounds and leads to happier passengers, all for the same revenue.

Also the airline has an expansive network with a monopoly in many sectors along with multiple monopoly one-stop connections. This gives it an edge over the competition and allows it to tell passengers to “take it or leave it”, while pushing up yields.

What next for Go FIRST and SpiceJet?

With the Tata group airlines and IndiGo taking the cake and the icing, too, what does that leave for Go FIRST and SpiceJet? (Other carriers, including flybig, Alliance Air, and Star Air, are small and have their own niche.)

SpiceJet has inducted wet-leased aircraft (plane + crew), which will help it add flights in the Winter Schedule and gain some market share. Go FIRST, on the other hand, is suffering due to engine issues and could see its market share erode further.

With Air India and Akasa looking to expand, the challenge for both Go FIRST and SpiceJet will be to retain employees, especially pilots.