India’s aviation industry has witnessed remarkable growth over the last three decades. The liberalisation of the early 1990s cracked open the skies to private carriers, transforming flying from a luxury into a lifeline for India’s middle class. With domestic air travel volumes now surpassing those of Brazil and Indonesia, India stands as the third-largest domestic aviation market in the world. Yet, behind the record-breaking passenger traffic and glossy new aircraft lies a sector battling crippling structural and financial flaws.
The post-pandemic rebound is real. IndiGo is expanding its fleet and route network at breakneck speed. Tata Group’s stewardship of Air India promises long-overdue renewal. But signs of deep vulnerability persist. The ghost of Jet Airways still looms—a painful reminder that growth without stability is a false summit.
Fuel Costs, Fragile Finances, and Flying Blind
India’s airlines operate in one of the most expensive aviation environments globally. Aviation turbine fuel (ATF) can account for up to half of an airline’s operational cost, and with state-level taxes reaching 30%, carriers are routinely battered by price volatility. India’s decision to keep ATF outside GST has added unnecessary complexity and cost to airline economics.
The business model across the sector remains fragile. FY2024 losses touched ₹13,200 crore despite surging demand. Airlines are highly leveraged, and the collapse of both Jet Airways and Go First underscores the systemic danger of chasing growth without sustainable margins. An inadequate domestic Maintenance, Repair, and Overhaul (MRO) ecosystem further weakens the sector. With most aircraft being serviced abroad, Indian carriers pay a steep price in downtime and foreign exchange outflows—challenges that are avoidable with the right policy support.
Cracks in the Runway: Regulatory and Infrastructure Gaps
India’s air traffic control systems and airport infrastructure are stretched to breaking point. With nearly 40% of airspace under military jurisdiction, commercial airlines are often forced into inefficient flight paths that increase fuel consumption and emissions. Meanwhile, major airports such as Delhi and Mumbai operate well over their intended capacity, leading to delays, overworked ground staff, and safety risks.
The Directorate General of Civil Aviation (DGCA) has struggled with enforcement and oversight. Operational inefficiencies—from pilot shortages to baggage mishandling—are becoming routine. The recent Air India crash in Ahmedabad, claiming 241 lives, was not just a tragedy but a tipping point. It has shaken public trust and brought urgent attention to safety standards. In a welcome move, Tata Group Chairman N Chandrasekaran has taken personal charge of Air India’s operations, working closely with CEO Campbell Wilson to stabilise the airline. But systemic reform must extend far beyond crisis response.
Sustainability Remains a Distant Horizon
Aviation contributes about 2.5% of global carbon emissions, and India’s rapidly growing passenger volumes mean this figure is bound to rise. The answer lies in scaling up Sustainable Aviation Fuel (SAF), yet India lacks domestic production capacity and a clear policy roadmap. SAF remains up to five times more expensive than conventional fuel, and without subsidies or mandates, adoption will remain symbolic rather than substantial.
Airlines need both policy support and financial incentives to make the green transition viable. In parallel, the fleet modernisation with fuel-efficient aircraft like the A320neo or Boeing 787 must accelerate. India cannot afford to treat climate responsibility as an afterthought.
The Time for Structural Reform Is Now
India’s aviation sector is a microcosm of the country’s broader economic story—ambitious, dynamic, but in need of urgent reform. To ensure that this boom is sustainable, a multi-pronged approach is essential.
First, rationalise fuel pricing by bringing ATF under GST. Second, build a competitive domestic MRO ecosystem through tax incentives and PPP models. Third, overhaul regulatory mechanisms with data-driven audits, AI-based monitoring, and capacity-building in agencies like DGCA. Fourth, free up restricted airspace and invest in airport capacity across Tier 2 and Tier 3 cities under the UDAN scheme. Finally, enact a long-term SAF policy that includes funding for R&D, blending mandates, and producer incentives.
The sky may be the limit, but without clear policies and structural changes, India’s aviation industry risks burning out before it reaches cruising altitude. Growth must be grounded in resilience, safety, and sustainability. The next phase of Indian aviation cannot be powered by numbers alone—it must be led by vision.
