The CEO of Vistara Airlines said that the Indian aviation industry remains strong, but external pressures pose the biggest growth risk.
In an exclusive interview with CNBC, Vinod Kannan said aviation demand in India is “still progressing” and moving in a positive direction.
However, he added that factors such as fuel costs and a strong U.S. dollar could impact growth.
“Airlines within India have always been extremely sensitive to external pressures. For example, fuel costs, and the dollar versus the Indian rupee, because depreciation always has an impact on our bottom line,” he told CNBC’s Sri Jegarajah.
He added that oil price fluctuations also need to be closely monitored.
FactSet data shows that Brent crude oil prices have increased by 6.46% in the past 12 months, while U.S. crude oil prices have increased by 7.64% during the same period.
India is witnessing a boom in the aviation industry, with the world’s most populous country set to become the world’s fourth-largest travel spender by 2030, largely due to a growing middle-income population and a sharp rise in household incomes.
In the fiscal year ending March 2024, India’s domestic air passenger traffic is expected to be US$154 million, an annual increase of approximately 13%. According to credit rating agency ICRA.
“The outlook for the Indian aviation industry is stable on the back of a continued recovery in domestic and international air passenger traffic, a relatively stable cost environment and an expected continuation of this trend in fiscal 2024-25,” the report states.
In recent years, the Indian government has taken significant steps to strengthen the aviation industry and promote infrastructure development.
quantity Domestic operating airports According to official government data, the number has doubled from 74 in 2014 to 148 in 2023.
Kannan said the aviation industry has always played a key role in India’s economic growth.
“There’s also a multiplier effect because for every job we create in aviation, there are three or four related jobs in the ecosystem,” he said, adding that the government was “very aware of this”.
“I think it’s only going to improve.”
Last week, the National Company Law Tribunal gave the green light to the merger of Vistara and Air IndiaReuters reports.
Tata Group owns 51% of Vistara; the remaining 49% is owned by Singapore Airlines.
The Indian conglomerate, which also owns businesses ranging from IT to steel to automakers, announced Vistara merges with Air India November 2022.
“With this merger, we will become the largest international airline outside India,” Kannan said, adding that in terms of domestic market share, “we will capture around 30 per cent of the domestic market share.”
The CEO said this would allow the airline to expand significantly.
—CNBC’s Charmaine Jacob contributed to this report.
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