It takes a while for the dust to settle down and sometimes the second thoughts are more powerful than the first reactions. A week since the mega Air India order was announced, it is time to go beyond why this and not that or why this and that. The focus should now be on understanding that order. While the airline has an aim of cornering 30% domestic market share in five years, it has not specified any such number for international.
A quick recap of Air India order is as below
- Airbus
- 140 A320neo
- 70 A321neo
- 34 A350-1000
- 6 A350-900
- Boeing
- 190 MAX (-8 and -10)
- 20 787-9
- 10 777-9
With six B77Ws and three more B77Ls on the way, along with four 789s of Vistara – the total widebody aircraft which are yet to join the fleet would be 83! These inductions will be over a period of five to seven years if not more.
The traffic
Air traffic in India is doubling every 10 years, and the scheduled commercial fleet is doubling every nine years, even when airlines go down at periodic intervals. Just to maintain the current market share, Air India will need to double the number of planes based on growth estimates for the domestic market. Add to this the fleet replacement and you know why the full service arm needs as many aircraft, in fact more than the LCC arm – where the fleet replacement part is very small due to its smaller fleet.
International traffic is dependent on more factors and not just capacity addition. It is dependent on bilateral rights, slots at congested airports like London Heathrow, codeshare and interline agreements along with feeder traffic, both International to International and Domestic to International or International to Domestic.
Current market dynamics and how does the traffic grow
Indian carriers ferried 44% of international passengers from India for the last quarter for which data is available while the rest flew with foreign carriers. Of the total pie, IndiGo carried 16%, followed by Air India at 11.8%. The airlines from Tata stable – Air India, Air India Express and Vistara had 21.28% share.
Keeping specific numbers away, let us look at the concept. Most routes, if not all, grow in terms of passenger numbers over a period of time. There will be two types of routes, those served by Air India and those not served by Air India.
Those served by Air India will have Origin – Destination (O-D) traffic, where a passenger from Delhi whose final destination is New York flies Air India on its Delhi – New York flight. There could also be passengers who are from Lucknow with New York as final destination, passengers from Delhi who have Boston as final destination and will be on a connecting flight from New York for Boston and passengers from Lucknow with Boston as final destination who will take three flights to reach there on Air India.
Passengers also opt for one or more stop flights for airline preference, class of service, convenience or something else. At some point when the traffic is high, there is spillover of traffic with the flights going full and passengers forced to look for other one stop options. The faster the market grows, the higher the spillover.
Market Intelligence softwares to which airlines are subscribed shows the passenger flows, by sector, airline and more. This coupled with the airlines’ own data helps decide on the next steps for the airline, provided there is capacity. When you have another aircraft at your disposal, you have three options – Add capacity to an existing route which is doing well (Eg: DEL-SFO of Air India); start a completely new sector (Eg: DEL-NBO); start a new point to existing station (Eg: BOM-SFO).
The first and second involve strengthening of the existing hub while the third option sees a non-hub station being strengthened with the help of a new point. This also helps free up capacity on existing flights (DEL-SFO) to cater to other cities as well as O-D traffic.
Constraints which will help Indian carriers
The ME3 (Emirates, Qatar, Etihad) as well as European carriers have India as their source market for flights to Europe and North America – which sees a sizable number of Indian travellers. Most of these markets are controlled by Bilateral Air Services Agreements (BASA) and are exhausted on the foreign carriers side as the case is for Emirates or Qatar. Assuming that new seat allocations are not happening anytime soon, there cannot be more dumping of capacity in the Indian market from these carriers which puts Air India in a dominant position to add flights and take care of the additional traffic.
In fact on top 10 routes from India where there are no direct flights, any non-stop flights which are launched will take away the traffic from ME3. The memories of Etihad having to scale down operations at SFO after Air India started DEL-SFO are still fresh for many.
Network Thoughts
When it comes to network planning, one size does not fit all and the thought of making the operations complex often does not cut teeth with the airline. So let us look at what the Air India network could have in store.
The airline may look to get rid of its own B77L (tender was our earlier) which leaves it with five leased B77L, all for SFO operations from DEL, BOM and BLR. These will eventually be replaced by the A350-1000 which has both the range and payload to do the mission.
The B77Ws which are currently the mainstay of its North America operations and will be refurbished will also be out of the fleet a few years from now. The oldest of the lot are already over 15 years old. The A350-1000 fills in the void here as well but the max payload at maximum range of the A35K is lower than that of B77W.
It roughly takes one aircraft to one international destination in Europe from India. As the markets mature and Air India returns to every destination it operated pre-COVID and operates a daily flight (which was not the case before) we are looking at 10-15 aircraft being utilised. Now add flights to some of these destinations from Mumbai (Paris, Frankfurt, Milan) and utilisation of all 56 weekly rights to London Heathrow (subject to slots) from Mumbai and Delhi – we have accounted for 26 aircraft already! The airline has also had selective services to London from other points along with services to Birmingham from Amritsar.
The other opportunity on offer is Australia where it takes more than one aircraft per day due to long flight times. The airline is yet to explore the non-stop opportunity from Mumbai. The North American bank to New York / Newark, Chicago, Washington, San Francisco, Toronto, Montreal, Vancouver takes the utilisation count to over 50.

Step up
The Dreamliners could become the route openers – from Europe to North America with the range they have. As the routes mature the routes could be taken over by higher capacity aircraft like the A350s. Airline economics is a complex subject. Air India has operated the 787s to Washington with heavy load penalty in one direction but if this entire package turns out to be cheaper than operating a 77W, the 50 empty seats hardly matter.
What is not known to me but is known to airlines is the cargo potential of each destination. Like passengers, cargo also trickles in from every nook and corner and sometimes is the difference between profit and loss.
The question in mind of many people has been the ten 777-9 on order. These high density aircraft with range that could comfortably fly to UK from any point in India without load penalty to cater to the slot constrained airport like Heathrow, giving an incremental capacity without adding flights, provided they do make it to the fleet.
Tail Note
Every step from ordering to execution comes with its own challenges. For Air India, the challenge is service – both hard and soft products. While the European carriers are cutting back on amenities, the ME3 are splurging. It would be easy to take the traffic away from European carriers, except for loyalty conscious guests who will take time to shift. Star Alliance lineage would help in this case with more partnerships which help accrue miles.
How the hard product shapes up and what is the standardisation will dictate the way forward to a large extent. As of today, there is a large mix already and this is likely to continue for a while. The last thing a passenger wants when he or she boards is a lucky draw.
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