As the Tata Group continues to consolidate its airline business under the Air India Group, integrating all the four airlines into two mega-airline brands i.e., full-service, and low-cost, the group is indeed on the way to revolutionize and lead the Indian aviation industry.
Over the past 14 months, since the takeover of the airline, the new Air India group under its 5-year Vihaan.Ai plan has considerably made significant improvements in various aspects and continue to do so, along with expansion of network, addition of aircraft in fleet, etc.
The vision of the new Air India is certainly to be the next global carrier of choice in the upcoming years, and compete with the giant rivals of Middle East, however that vision also brings new challenges, that probably needs to be dealt with innovative and unique thinking, and not completely with the traditional practices.
The Mega-Hub Strategy
For Air India, Delhi has always been a focus of center and the point to develop as a mega-hub, to compete with foreign rivals. As all the decisions comes with its own consequences, the policy of than Government-owned Air India to develop Delhi as a hub, in the late 2000s, had its own positive as well as negative impacts.
Under the new leadership as well, the airline has a clear focus to develop a mega-hub at Delhi, while Mumbai & Bengaluru to be the other primary points of focus in the Southern India.
India is a vast country with over 1.4 billion population and has an ever-developing international market. There exist huge opportunities for everyone in this market, however, not just Air India, but not a single Indian carrier in the past decade has ever been successful to capitalize on these opportunities. While there could be several reasons for this failure, however, every major airline had the same approach, i.e., Hub-and-Spoke model.
There certainly are many advantages for the airlines with this model, however, in the present times, where people prefer to fly to their destination in shortest time, Air India needs to limit the Hub-and-Spoke model for some particular markets to a certain extent, and look beyond it, in order to challenge its rivals in the true sense.
Beyond Mega-Hubs
Whether it be Delhi, Mumbai or Bengaluru, the Middle Eastern giants, including, Emirates, Etihad, and Qatar Airways has established a strong presence in these markets, along with other metro and major secondary cities of Chennai, Hyderabad, Kolkata, Cochin, Trivandrum, and Ahmedabad, etc.
With multiple daily frequencies on these routes, providing one-stop connectivity across the globe via there respective hubs of Dubai, Abu Dhabi, and Doha, along with the most competitive fares and the best passenger experience onboard the aircraft, it is a long way for Air India until it could lead the markets of Delhi, Mumbai and Bengaluru, and benefit from major secondary markets for feeder traffic.
Map Source: gcmap.com
In the present times, there probably exist no major market in India, which can offer a full-monopoly business environment for Air India to expand its international network across Europe, North America & Australia, and grow its market share, except one, i.e., the Northern Indian city of Amritsar.
Along with three mega-hubs, Air India probably also needs to explore the development of a single major strategic base or a secondary hub, which would support its overall growth steadily and sustainably.
Amritsar As A Strategic Base
It is an open secret that, Delhi thrives upon the market of Punjab, and Airlines thrive upon the market of Delhi in Northern India. The volume of international traffic that Delhi gains from the market of Punjab is beyond substantial. The population of Punjab might be just over 30 million, but the large Punjabi diaspora across North America, Europe, and Australia, changes the definition of this market entirely.
For instance, with the Punjabi population number going over 1.2 million in the United States and 2 million in Canada respectively, there are estimated 800,000 indirect travelers between Punjab and North America every year.
Emirates, Etihad, Qatar Airways, British Airways, Lufthansa, etc are some of the biggest gainers of Punjab’s market from Delhi, and that is why there is a reason why the Middle Eastern and other world-leading carriers want Amritsar to be added as a point of call for them in the Bilateral Air Service Agreements immediately.
Apart from Delhi in the Northern India, Air India Group may explore developing Amritsar as a strategic base or a secondary hub, in order to expand its international network, benefiting from full-monopoly on most of the North American & European routes, significantly low-operating costs, along with establishment of brand loyalty, and reducing the traffic leakage to rivals via Delhi.
By developing Amritsar mere as a feeder market for the international network beyond Delhi, Air India may never be able to fully realize the potential of Punjab’s market and will continue to lose the market share to the rivals.
The Dilemma of Data?
For Air India to develop Amritsar as a strategic hub, the airline needs to look beyond “Data.” “Data” is considered as one of the most important factors in the network planning of an airline, however it does not always represent the true potential and opportunities of a market.
In the recent years, Amritsar has always been labelled as a low-yield market and even the traffic data available for some of its markets, represented Amritsar as non-viable for long-haul non-stop services to those market including that of the UK and Italy.
Prior to the Covid-19 pandemic, no would have ever thought of non-stop services between Amritsar and Italy, as the data available for these routes, represented these as nonviable. However, today Amritsar is the only city in India to be connected with 3 major cities across Italy, and has emerged as the 3rd largest market for Air India’s UK operations after Delhi & Mumbai.
Amritsar’s Present Network & Competition
With over 8 airlines operating in Amritsar’s international market, the city is directly connected with 10 major international cities in over 7 countries across the globe. This makes Amritsar the 2nd busiest international airport in Northern India after Delhi.
At present, it is the 3rd most connected airport with Europe in India after Delhi & Mumbai, in terms of number of airports connected, with scheduled services to London Gatwick, Birmingham, Rome, Milan Malpensa and Milan Bergamo.
Map Source: gcmap.com
While Air India continues to enjoy a full-monopoly on routes to UK from Amritsar, SpiceJet and the Italian carrier, Neos Airlines are dominating and leading Amritsar’s Italy market. Neos is now also expanding and trying to capture Amritsar’s North American market, with an exclusive route to Toronto, Canada via Milan Malpensa, along with connectivity with New York as well.
In Amritsar’s Middle Eastern market, Air India Express, IndiGo and SpiceJet are the major players, with non-stop routes to Dubai & Sharjah in the UAE. While in the South-East Asia and Oceanic market, Scoot is leading, along with the Malaysia based hybrid carrier, Batik Air. Several airlines across South-East & East Asia are now also eyeing this market for short-term expansion in India.
In terms of market share, Air India Express leads Amritsar’s international market with a staggering 20.63% market share, followed by Scoot at 15.17% and SpiceJet at 14.86%.
The following graph represents the international market share of all operating airlines as of April 2023.
Strengthening Existing Network
At present, Air India Group leads Amritsar’s international market with approximately 34.19% market share, with Air India operating 6x weekly non-stop services to London & Birmingham, while Air India 12x weekly services to Dubai & Sharjah.
There exist large opportunities for further expansion in both these markets from Amritsar, with the total non-stop traffic between Amritsar and UK expected to exceed 125,000 this year, while between Amritsar and UAE about 430,000.
Notably, the Amritsar-London/Birmingham are well-performing routes for Air India in terms of traffic as well as yields. In the CY2022, the non-stop Amritsar-London Heathrow route had 56,002 passengers and recorded an average Passenger Load Factor (PLF) of 84.65%, while Amritsar-Birmingham route had 32,761 passengers and the average PLF at 86.97%.
While on the other hand, in the year 2022, there were about 348,450 point-to-point non-stop passengers between Amritsar and Dubai & Sharjah, which was an all time-high record. In 2019, there were approximately 320,000 non-stop passengers between Amritsar and UAE.
As Air India plans to upgrade its services between London Heathrow and Delhi & Mumbai to 777-300ER aircraft from the 787-8 Dreamliner in the upcoming months, Air India could focus at expansion of frequencies on the Amritsar-Birmingham/London routes in the upcoming peak winter season, especially as the former leader of this market, Turkmenistan Airlines plans a return to Amritsar later this year.
Expansion Into New Markets
For further expansion into Amritsar’s long-haul international market, Air India could focus on a single market at a particular time, and then move ahead towards developing the next one. At present, Canada could be the most viable market for the airline to begin with.
With over 500,000 passengers travelling annually between Punjab and Canada, it is the highly unserved market of Amritsar. Toronto & Vancouver being the major hubs of the Punjabi diaspora offers a great opportunity for Air India to expand in this ever-developing market.
It is correct that, this market majorly comprises of the Visiting Friends and Relatives (VFR) and Student Tourism, which is often termed as low-yield traffic, however, it is the same traffic that is contributing to the success of non-stop routes to Canada from Delhi, by Air India and Air Canada.
If we go by the “Data” logic of this market as well, the viability for non-stop routes between Amritsar and Canada might not be there, however, it was the “Data” only that represented Amritsar as nonviable for non-stop services to UK, while there was no market at all between Amritsar and Italy, until the airlines tested for themselves. For SpiceJet, it could be said that the Amritsar-Italy market emerged as a savior in the Covid-19 pandemic.
This absolutely requires a careful evaluation and high investment by the airline for initiation of these non-stop routes to Toronto and Vancouver from Amritsar. While some investments may not give an excellent return, some may prove to be the most valuable investment ever for a business. It all depends upon one’s abilities to take the risk and lead the way.
For Air India Express, Amritsar’s Middle Eastern market could be the best market to capitalize its expansion upon. There exists a large unserved demand for new routes to Abu Dhabi, Muscat, and Kuwait, along with Doha.
As the airline inducts new aircraft in its fleet, the airline could focus upon expanding its presence in Amritsar’s Middle Eastern market. With the airline’s existing major bases in South India, including Cochin, Kozhikode, Manglore, Kannur, etc, Amritsar could be the best option for the airline for establishing a major hub in Northern India, considering various factors, including, large catchment area, high traffic volume, etc. At present, Amritsar is the largest base for the airline in the Northern India.
Map Source: gcmap.com
As always, the market of Amritsar is a unique market, and one requires excellent understanding and knowledge of the same to successfully capture and lead it.
About The Author
Ravreet Singh is a young blogger with an avid interest in aviation business. His ultimate goal is to become an Airline Business Professional. He possess good research, analytical and strategy skills, along with knowledge about various aspects of commercial aviation. He is also the youngest team member of FlyAmritsar Initiative, a public advocacy campaign for better air connectivity & sustainable development of Amritsar.
Email: ravreetsingh15.rs@gmail.com