India’s aviation ambitions are soaring, but the industry’s financial reality remains firmly grounded. Even as the government talks up the potential for five major airlines in the country, the existing two dominant players — IndiGo and Air India — are grappling with operational crises, rising costs, and wafer-thin margins that highlight the structural fragility of Indian aviation.
The past month has underscored just how precarious the situation is. Hundreds of flights were cancelled after operational disruptions at IndiGo, the country’s largest carrier, throwing travel plans into disarray for thousands of passengers. Its closest rival, Air India, has faced an even tougher period. In 2025, a London-bound Air India aircraft crashed in a tragic accident that killed all but one of the 242 people on board. More recently, the airline came under scrutiny after Canadian authorities ordered an investigation into a pilot who allegedly failed two breathalyzer tests before a scheduled flight.
These incidents have reportedly intensified pressure on Air India’s leadership, with the Tata Group — which owns the airline alongside Singapore Airlines — said to be considering changes at the top to accelerate the carrier’s long-promised turnaround.
A Duopoly in a Rapidly Growing Market
Despite these challenges, India remains one of the world’s fastest-growing aviation markets. According to official estimates, Indian airlines carried around 350 million passengers in 2024, though this figure includes multiple trips by the same traveler. Alternative industry estimates that track point-to-point journeys place passenger traffic closer to 174 million, still a formidable number by global standards. The government projects total passenger volumes to surge to 1.1 billion by 2040, driven by rising incomes, urbanization, and improved connectivity.
Yet the industry today is effectively a duopoly. IndiGo controls nearly 65% of the domestic market, while Air India holds around 27%, leaving little room for other players to scale meaningfully. Addressing Parliament in December, Civil Aviation Minister Kinjarapu Rammohan Naidu said India has the demand to sustain “five big airlines,” adding that it is the “best time to start an airline in India.”
Aviation experts, however, remain unconvinced.
A Brutal History of Airline Failures
India’s aviation landscape tells a cautionary tale. Over the past three decades, a long list of carriers — including Jet Airways, Kingfisher Airlines, Sahara Airlines, Deccan, GoAir, and ModiLuft — have collapsed under the weight of mounting losses and debt.
“The Indian airline market has been exceptionally difficult to operate in,” said one aviation economist, noting that more than 15 airline bankruptcies have occurred over the past two decades alone.
IndiGo’s survival, analysts say, has hinged on its rigid adherence to a low-cost model, strict cost discipline, and operational efficiency. Air India’s trajectory was very different. For decades, it was propped up by taxpayer funds as a state-owned airline. After its privatization in 2022, the Tata Group launched a multi-year transformation program, but the airline is still battling legacy issues, from fleet modernization to service consistency.
Smaller carriers have fared worse. SpiceJet, with a market share of under 3%, has repeatedly flirted with bankruptcy, underscoring how unforgiving the market remains.
Costs in Dollars, Revenues in Rupees
At the heart of the industry’s struggle is a relentless cost–revenue squeeze. Nearly 65% of airline revenue in India comes from domestic travel, where tickets are priced in Indian rupees. In contrast, a significant portion of airline expenses — aircraft leases, maintenance, insurance, and spare parts — are denominated in U.S. dollars.
With the Indian rupee emerging as one of Asia’s weakest-performing currencies in 2025 and expected to face continued pressure, operating costs are set to rise further.
Fuel costs compound the problem. Aviation turbine fuel accounts for 40%–50% of airline operating costs in India, well above the global average of around 30%, largely due to high state-level taxes. Airport charges are also increasing as terminals across the country undergo expansion and modernization.
Yet airlines have limited pricing power. “There is a psychological fare threshold of about ₹5,000 on domestic routes,” said a New Delhi-based aviation consultant. “Even in a near-monopoly market, airlines struggle to raise ticket prices without hurting demand.”
Big Ambitions, Fragile Economics
India currently has 163 operational airports, but the government aims to expand that number to 400 by 2047 under its regional connectivity push. The UDAN scheme, launched in 2016, seeks to make flying affordable for ordinary citizens by subsidizing fares on select regional routes and connecting underserved areas.
While the initiative has boosted connectivity, industry insiders warn that commercial viability remains a serious concern. “With the exception of IndiGo, almost every airline has struggled to sustain profitability,” said one analyst, pointing to high fixed costs and volatile demand as persistent hurdles.
The paradox is stark: India wants to democratize air travel and create room for more airlines, but the economics of the sector remain brutally unforgiving. Without deeper structural reforms — including rationalizing fuel taxes, stabilizing currency exposure, and improving airport cost structures — simply adding more players may only replicate past failures.
Bottom Line
India’s aviation story is one of immense demand but fragile execution. While policymakers envision a future with five large airlines serving a billion passengers, the present reality is that even two dominant carriers are operating under severe strain. Until the underlying cost pressures ease, India’s ambition to make flying routine for the masses may remain grounded by harsh financial realities.
