Indian Market

February 2023
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Agenda
Facts and developments on the India market

India market today – local operators

Domestic

International

Market for Widebody aircraft

Aviation in India – an investor’s perspective

In Strict Confidence
India Market
Today
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Overview of Market
India Domestic
7.3%

Passengers Carried by Domestic Airlines (2017-2022) Passengers Carried by

in lakhs Domestic Airlines in January
2019-2023 (in lakhs)

1,441.7
1,389.8
1,232.5
1,171.8
125.1 127.83 125.4
998.9
838.1

 3.74% 630.1  47.05%

 18.60%  33.01%
 2.2%  1.9%
 17.31%  56.29%

2022 shows
Double-digit …Until January
firm recovery –
growth a long- 2023 reveals a
but appears to
standing feature near-complete
fall short of
up until 2018… recovery!
2019…

*Source: DGCA
In Strict Confidence
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Overview of Market
India Domestic

…and now in February!

In Strict Confidence
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Overview of Market
India Domestic

Market Share of Top Domestic Airlines in 2022 (Jan-Dec)

= 24.1%

In Strict Confidence
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Overview of Market
India Domestic

Market Share of Top Domestic Airlines in January 2023

= 25.4%

New
Entrant

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Overview of Market
International – Regional Markets ex-India

International Markets ex-India – SIZE (% by region – ASKs)

2.1%
*350,698,741

*All amounts computed on basis of

scheduled ASKs / capacity for Feb’23

In Strict Confidence
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Overview of Market
International – Regional Markets ex-India

International Markets ex-India – SIZE (%by region – ASKs)

2,349,130,219
and
350,698,741

*All amounts computed on basis of scheduled ASKs / capacity for Feb’23

In Strict Confidence
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Overview of Market
International – Regional Markets ex-India
International Markets ex-India International Markets ex-India International Markets ex-India
– South Asia (ASKs) – Gulf / GCC (ASKs) – South East Asia (ASKs)

Vistara, 1%

Indian carriers: 53.4% Indian carriers: 47.3% Indian carriers: 30.7%

*All amounts computed on basis of scheduled ASKs / capacity for Feb’23

In Strict Confidence
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Overview of Market
International – Regional Markets ex-India

International Markets ex-India – Europe

= 26.5%

*All amounts computed on basis of scheduled ASKs / capacity for Feb’23

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Overview of Market
International – Regional Markets ex-India

International Markets ex-India – Europe

= 26.5%

Offering around 27% of ASKs, Indian carriers (one airline group), India fares not too badly in this segment
Taking some comparator markets (one sole country, relatively large population, flying to Europe direct):
 MEXICO: Mexican carriers (Aeromexico) has only 20% of Mexico-Europe capacity
 BRAZIL: Brazilian carriers (Azul and LATAM) have together around 28% of Brazil-Europe capacity
 By contrast, for KOREA this figure is 56% and JAPAN it is 40% (these are longer established carriers

*All amounts computed on basis of scheduled ASKs / capacity for Feb’23

In Strict Confidence
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Overview of Market
International – Regional Markets ex-India

International Markets ex-India – North America (direct)

January 2019 January 2023

8.5%
21.5% 7.2%

11.8%
55.0% 72.5%

23.5%

India to US and Canada is typically NOT a direct market i.e. majority of O&Ds go via third countries
(e.g. Middle East/Europe).
However, Air India has been championing this market with significant growth (and well ahead of
nearest rivals, for now).

The “pie” is larger now (increasing over 16% since Jan ‘19) and Air India capturing a larger share of
this pie.
*All amounts computed on basis of scheduled ASKs / capacity for Feb’23

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Overview of Market
International – Regional Markets ex-India

Dependence of India’s Airlines on International % ASKs

Domestic International

54% 46%

87% 13%

81% 19%

86% 14%

*All amounts computed on basis of

scheduled ASKs / capacity

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Market for Widebody
Aircraft
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Anyone for Widebodies?

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Widebody Aircraft in International Markets

International – Regional Markets ex-India

Presence of Widebody Aircraft on International ex-India

Of the main international markets, TWO are exclusively WB: Europe and North America (direct)

South Asia (international) is solely a NB market…

Hence question is: what about WBs on Gulf and South East Asia routes?

Gulf South East Asia

32% 47%

68% 53%

Widebody ASKs Narrowbody ASKs Widebody ASKs Narrowbody ASKs

SEA = 6x carriers use WBs, 3x of which use both. GULF = 5x use WBs, 3x of which both

*All amounts computed on basis of scheduled ASKs / capacity for Feb’23

In Strict Confidence
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Conclusions
Short-to-Medium Haul International Markets ex-India

On Gulf and SE Asia markets, unit cost advantage of operating widebodies exists, however…

Majority operators still only utilise Narrows and those operators deploying Wides often do not use
solely WBs (but fly NBs as well):

Low Cost Carriers utilizing widebodies remains very much unproven as a model

Indian carriers remain predominantly LCCs

Network carriers / FSCs (only one now – AI/Vistara) punching above their weight on India to
Europe and India to North America routes.

Possibly space in India for another network carrier, which could aim to compete on such routes;
meantime, LCCs likely to focus on short-medium haul, for which WBs not forcibly needed.

In Strict Confidence
Aviation In India - An Investor’s
Perspective
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Investor considerations: the India market

Existing and would-be airlines in India need investment – here are some of the issues…

Local / International Investors:

Assumed airline business risk implies very high cost of capital. Esp. given global interest rate
rises (dollar investors); by contrast, rupee rates today at (or even below) LT average.

High growth industry in a (medium-to) high growth economy. Few product competitors (e.g.
roads/rail) – there are lots of positives there to attract investor capital.

What could be done to enhance the sector’s prospects:

Better yield management practices (in line with international markets). D-15 fare floors.

Off-putting practices that have for years limited profitability and deterred investment (e.g. tax on
fuel, GST on rentals, RD guidelines, fare caps).

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Investor considerations: the India market

Investors in aviation assets (aircraft / engines) in the India market – key considerations

Market for financing aviation assets

Indian airlines predominantly reliant on leasing; vast majority of a/c in India today on op. lease.

Even if owning an option, leasing can be wise given high cost of rupee debt. Further, better to
have aircraft owned by “efficient” equity in pursuit of lower overall cost…

Access to a large market: Indian market demands each of SLBs, placements, mid-life aircraft.

For local investors: US dollar denominated assets, even if headline returns appear modest.

Diversity of asset deployment: location and country exposure management.

What could be done to enhance attractiveness of investing in assets on lease in India:

Continued improvement on Cape Town Convention assimilation.

As with investing in airlines: stronger credit metrics a big pull (and could even open up new and lucrative
sources e.g. Japanese financiers, currently closed to India).

Still fewer options today for owners/lessors to debt finance India-based assets.

In Strict Confidence