India wants five major airlines – but even two barely survive

“This report is from this week’s CNBC ‘Inside India’ newsletter, bringing you timely and insightful news and market commentary on the emerging powerhouse. Subscribe here.

Last month, Indian airports descended plunged into chaos as hundreds of flights were canceled by the country’s largest airline, Indigo, upending the travel plans of thousands of passengers.

Its closest competitor, Air India, is also facing difficulties. In 2025, one of its planes bound for London crashed in a tragic accident, killing all but one of the 242 passengers on board. And most recently, Canadian authorities ordered the airline to investigate a pilot who failed two breathalyzer tests before a planned departure.

The Tata group, which owns Air India alongside Singapore AirlinesEast would have plans to replace chief executive Campbell Wilson to speed up the airline’s turnaround.

A two-person fight

Indigo orders nearly 65% ​​of the market share in India, while Air India has around 27%, according to data from the country’s aviation regulator, the Directorate General of Civil Aviation. This leaves the Indian airline industry effectively a duopoly.

India is already one of the world’s fastest-growing airline markets, although estimates of its size vary depending on how passenger travel is counted. The government says Indian airlines carried around 350 million passengers in 2024, a figure that includes multiple trips by the same traveler.

On the other hand, passenger traffic amounted to 174.1 million, according to a June 2025 report by the International Air Transport Association, which measures origin-destination travel. The government expects a total the number of passengers will increase to 1.1 billion by 2040.

Speaking in Parliament on December 8, Indian Civil Aviation Minister Kinjarapu Rammohan Naidu said the country needed sustain “five major airlines”, adding that his government wants more players in this sector and that this is “the best time to start an airline in India”.

Industry experts are not convinced.

According to them, adding new airlines will not solve structural problems, such as cost and revenue pressures specific to Indian airlines.

Air India’s journey has been significantly different. Until 2022, the airline was state-owned, with taxpayers’ money covering years of losses. After its privatization, Tata Group and Singapore Airlines spear a “multi-year transformation program” at Air India.

SpiceJet, another national carrier with a market share of 2.7%, has come close to bankruptcy several times since its inception.

“The Indian airline market has been difficult to operate in, as evidenced by multiple airline entries and exits, including more than 15 bankruptcies over the past two decades,” said Alan Lim, director of Alton Aviation Consultancy.

Reduced costs and revenue

Pressure on costs and revenues remains the main obstacle in the sector.

India’s major airlines earn nearly 65% ​​of their revenue from domestic travel, for which passengers pay in Indian rupees, says Mark Martin, founder and CEO of aviation consultancy Martin Consulting.

A much smaller share of airline revenue in India is dollar-based, he said, adding that most expenses are paid in U.S. dollars. These include leasing, maintaining aircraft and purchasing spare parts, making airlines vulnerable to currency fluctuations.

As the Indian rupee becomes the Asian currency the least efficient in 2025 against the dollar and are expected to weaken further, operating costs are expected to increase.

High fuel costs add to the pressure. They account for 40-50% of airline costs in India, according to Alton Consulting, well above the global average of around 30%, due to high state taxes on jet fuel.

However, even in the face of rising costs, airlines have little room to pass them on to passengers without seeing a drop in demand.

“There is a high threshold of 5,000 rupees ($55) for airfares in India,” Harsh Vardhan, president of New Delhi-based Starair Consulting, told me. Vardhan refers to the price of domestic routes.

Even in a near-monopolistic market, airlines find it difficult to raise fares, he said.

Airport fees are also increasing as more terminals are built or upgraded across the country.

India currently has 163 airports, but it hopes to more than double that number to 400 by 2047, under Prime Minister Narendra Modi’s UDAN program, which aims to make air travel easier. accessible and affordable for more Indian citizens.

The government program, launched in 2016, focuses on strengthening regional connectivity in small towns and remote areas by connecting underserved airports and introducing subsidized fares on certain routes.

That said, “viability is becoming a big question” for airlines, said Vardhan of Starair Consulting.

Except for Indigo, all other operators have struggled to remain profitable, he said, pointing out that prohibitive costs are one of the main reasons for the collapse of major airlines in India, such as Jet Airways and Go Air.

Given the difficulty of supporting airlines and the fragile finances of those still operating, India’s ambition to make flights regular for ordinary citizens may prove harder to achieve than policymakers think.

Best TV Picks on CNBC

India’s Communications Minister Jyotiraditya Scindia said India will lead the world in 6G in satellite spectrum allocation, adding that it has already awarded three licenses to OneWeb, Reliance and Starlink.

Saurabh Mukherjea, founder of Marcellus Investment Managers, said downward pressure on the Indian rupee would persist unless the US and India reach a free trade agreement, which he said is unlikely given US domestic politics.

Sumit Ritolia, senior analyst at Kpler, said recent US measures in Venezuela could have positive implications for Indian oil refiners in the long term if sanctions are lifted and production resumes.

Need to know

Indian state refiners buy Russian oil. Demand from public refiners is led by domestic demand for fuel and by price savings. This leads to a redistribution of Russian oil supply rather than a collapse in demand.

The Indian economy is expected to grow by 7.4% in the financial year ending March 2026. The Indian economy is expected to grow at a rate faster rate than that of the previous year, supported by public spending and a sustained pace of private consumption.

Indian operators KFC and Pizza Hut, Devyani and Sapphire Foods, will merge their operations. The agreement would be combine the two main franchise operators of Yum! Brands in India as one entity. Devyani will issue 117 shares for every 100 equity shares of Sapphire Foods.

Every weekday, CNBC’s ‘Inside India’ news show brings you news and market commentary on emerging companies and the people behind them. Stream the show live on YouTube and check out the highlights here.

SCHEDULES :

WE: Sunday-Thursday, 11:00 p.m.-12:00 a.m. ET
Asia: Monday to Friday, 11:00 a.m. – 12:00 p.m. SIN/HK, 8:30 a.m. – 9:30 a.m. India
Europe: Monday to Friday, 05:00 to 06:00 CET