Nearly 10 per cent of Air India’s total international passengers currently use Indian airports as transit hubs, and the Tata Group-owned airline aims to double this share in the next three years, Chief Commercial Officer Nipun Aggarwal said on Sunday.
Approximately 130 million passengers fly over India annually, with about 10 per cent of this transit traffic handled by Dubai and 7.5 per cent by Doha.
In comparison, Delhi currently handles less than 1 per cent of this transit traffic, highlighting a significant growth opportunity, Aggarwal said during a press briefing.
“We’ve already increased our traffic to the west of India, but now need to enhance connectivity to the east, especially to Southeast Asia, to capture more international-to-international (I2I) traffic,” he explained.
Aggarwal emphasised the untapped potential in the Europe-Australia corridor, which Indian carriers have largely overlooked.
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“We have aligned our flight schedules to connect Western destinations like Frankfurt, London, and Paris with Eastern destinations like Melbourne and Sydney,” he noted.
Currently, I2I traffic accounts for about 10 per cent of Air India’s total international traffic. Aggarwal expects this share to grow to 15-20 per cent over the next three years. “That is our aspiration, and we are committed to achieving it,” he added.
Since 2019-20, revenue from Air India’s front cabins (business class and premium economy) has grown 2.3 times, while revenue from economy class has increased 1.6 times.
“We’re increasing the number of front-cabin seats on our widebody planes for this reason. Once the retrofit is complete, the number of front-cabin seats will double compared to today. As a result, the yields from these planes will increase significantly,” Aggarwal said.
Air India plans to begin retrofitting its existing widebody planes by July.
Air India has consistently opposed increasing bilateral rights for countries such as the UAE and Qatar, stating that their airlines use their hubs to carry a significant portion of traffic from India to North America and Europe. In the coming years, Air India plans to significantly increase its direct flights to North America and Europe.
“We have already made our position very clear. If we aim to capture a larger share of the international market, we need to strengthen our hubs (Delhi and Mumbai). The capacity being deployed is extending beyond these hubs (Dubai, Doha). The bilateral rights India has granted are more than sufficient for origin-destination (O-D) or point-to-point traffic,” he explained.
The Indian government recently allowed Indian carriers to wet lease planes on new routes to meet rising demand, amid slow deliveries of new aircraft. Wet leasing involves renting an aircraft along with its crew, maintenance, and insurance, while dry leasing provides only the aircraft.
Aggarwal clarified that Air India is not currently exploring wet leasing.
"We’ve found that wet leasing can be operationally challenging, especially when building a sustainable flight network around it. While wet leasing can be opportunistic for sudden demand surges, we are not focusing on it at the moment. We’ve placed orders for new planes,” he elaborated.
Currently, 20 per cent of Air India’s international seats are sold directly via the airline’s website or app, 40 per cent through domestic point-of-sales (PoS), and the remaining through foreign PoS.
When asked about increasing sales via foreign PoS, Aggarwal explained that it is difficult to pinpoint a specific strategy for higher per-seat revenue when seats are sold through foreign channels.
“It varies from market to market, and we focus on yield maximization rather than targeting a specific PoS number,” he noted.
The recent depreciation of the rupee has put pressure on Air India’s cost structure, as most of its costs are dollar-denominated, except for employee expenses.
“Air India has a natural hedge due to our significant international operations, as we charge in foreign currencies. However, half of our tickets are still sold in India in rupees, which impacts our profitability and fares,” Aggarwal noted.
"The falling rupee increases fares, which in turn affects demand. It’s a challenge for the entire industry, but we are addressing it by improving productivity and implementing various other measures," he added.