The new frontier: Air travel between Australia and India

What's behind the phenomenal growth in direct services between Australia and India?

The Australia-India market has exploded in recent years, with phenomenal growth in both passenger numbers and airline capacity. This should be no surprise to most Australians and Indians given the growing economic, political and cultural ties between the countries.

The economic and political partnership has been reinforced by the establishment of a free trade agreement between the countries, while the cultural ties are more than just cricket, as Indian migration to Australia has grown tremendously over the last two decades.

Yet, direct airline capacity between Australia and India has lagged, with anaemic growth until very recently. While contemporary growth has been aided by Australia and India agreeing to open skies in June 2018, recent capacity growth might also reflect the market reaching a pivot point where Australia-India travel is no longer just low yield VFR traffic. Capacity growth has also been assisted by Air India’s growing ambitions since privatisation in 2021, and Qantas’s shifting of capacity from the United States since the COVID-19 pandemic.

Australia and India entered into a de facto open skies agreement in June 2018, allowing airlines of both countries unlimited access between Bangalore, Chennai, Mumbai, New Delhi, Hyderabad, and Kolkota, and Adelaide, Brisbane, Melbourne, Perth, Sydney, and one additional city.

This article analyses the Australia-India market, beginning with contemporary route networks and market demand, and concluding with a quick look at future prospects.

Airlines and routes

Qantas made a return to India with 4x weekly flights between Melbourne and Delhi in December 2021, followed by 3x weekly seasonal flights between Sydney to Delhi the following month. Bengaluru replaced Delhi as the destination for the Sydney flight in September 2022 with the flight remaining year round rather than seasonal. Qantas have varied the frequency flights, adapting for seasonal demand variations, however capacity has increased steadily since introduction.

Qantas have previously served India through multiple configurations over the years, including as a stopover on routes to Europe. It’s most recent schedule were 3x weekly Brisbane-Singapore-Mumbai (between 2009 and 2012). The frequency and capacity of the contemporary operations dwarfs the previous operation which exploited the Singapore scissor hub, connecting passengers from Melbourne, Perth and Sydney via Singapore.

In the year to February 2024, Qantas provided 203,396 seats on 826 flights, carrying a total of 178,733 passengers with a load factor of 88%. By comparison, in the year ended February 2012, they provided 101,011 seats on 308 flights, carrying a total of 84,206 passengers with a load factor of 83%.

Air India has had a consistent presence in the Australian market since 2013, connecting Delhi with both Melbourne and Sydney. Since the return of flights after the COVID-19 pandemic, Air India has increased both Melbourne and Sydney flights to daily. In December 2023, they added flights from 3x weekly flights between Mumbai and Melbourne.

In the year to February 2024, Air India has provided 391,168 seats on 1,528 flights, carrying a total of 338,179 passengers with a load factor of 86%. Compared to the pre-pandemic baseline of the year ended February 2020, this reflects an 82% increase in flights and capacity, and an 84% increase in passenger numbers.

Comparing the aggregate market trends is challenging given that Qantas and Air India’s operations did not overlap pre-pandemic. Nevertheless, the growth is significant with capacity nearly tripling since before the pandemic. Air India is the dominant carrier accounting for 66% of capacity (65% of passengers) over the last year. Notably, Air India’s capacity is consistent over the whole year while Qantas manage capacity with significant seasonal variation.

The analysis so far only covers capacity and passenger flows via direct flights. A significant number of passengers likely connect through a range of connecting options. Let’s consider these …

Connecting options play a crucial role in competition

The increase in capacity by Air India and Qantas over the last two to three years is a welcome boost for a market that has otherwise been dominated by connecting carriers. Data published by CAPA shows that as recently as 2016, Air India and Qantas accounted for only 11% and 4% of passengers between Australia and India. More recent data quoted by IASC in 2023 puts Air India and Qantas’s market shares at 14% and 9%, respectively.

While connecting carrier market share has declined from 85% to 78% between 2016 and 2023, they still dominate the market and are likely to do so for some time. Historically, the dominance of connecting carriers is likely the result of the fragmentation of the Indian market combined with the market being dominated by low-yield traffic. The same CAPA data indicated that 56% of Indian traffic was to/from Delhi and Mumbai, with 9% each to/from Bengaluru and Hyderabad, and 8% and 7% each to Chennai and Ahmedabad (and still 11% elsewhere).

Connecting traffic is dominated by Singapore Airlines (including Scoot), Malaysian Airlines and Thai Airways, who fly to 13, 9 and 9 destinations in India each, respectively. Even Qantas play the connecting game, with 8 Indian destinations available via codeshare with IndiGo via Singapore.

How many people are traveling between Australia and India?

Travel between Australia and India has boomed over the last two decades. In the year to March 2024, 501,980 Australian residents traveled to India alongside 410,240 short-term visitors traveling to Australia from India. This represented an increase of 677,430 travellers in total since June 2008. an increase of 289%. The increases were driven both by Australian residents traveling to India (278%) and short-term visitors traveling to Australia from India (303%).

These increases have outpaced increases to/from other countries, with travel to/from India accounting for 5% of all countries in the last 12 months compared to just 2% in June 2008.

Notably, travel to/from India has been one of the quickest to recover after the pandemic and one of the only countries which has seen demand exceed pre-pandemic levels.

What is driving demand?

Increasing demand for travel between the Australia and India has been driven by migration, economics and cultural linkages. The 2021 Australian census shows 673,352 Indian born residents in Australia accounting for 2.7% of the total population and 9.6% of the total population born outside of Australia. This makes the Indian community one of the largest immigrant groups in Australia. In fact, the census also shows that India is now the second largest foreign born immigrant group in Australia behind the United Kingdom.

Just a decade earlier, the 2011 census showed only 295,362 Indian born residents accounting for just 1.4% of the total population and 5.6% of the total population born outside of Australia. These data also understate the importance since it only accounts for those born outside of Australia, ignoring the growing second and later generation communities. Clearly there has been significant growth in Indian migration to Australia over the last decade.

The growing economic relationship was cemented by the entry into force of a Free Trade Agreement in December 2022. Trade in goods with India increased from 2.1% to 3.5% of all Australia’s foreign trade between 2014 and 2023. Trade in services saw even larger growth, increasing from 4.4% to 10.2% of Australia’s total trade in services.

And let’s not even talk about cricket …

Where to from here?

While the growth in demand between Australia and India has been consistent for more than a decade, seat capacity remained relatively unchanged until the post-pandemic recovery. For example, between 2014 to 2019, arrivals in Australia from India grew by 364,510, yet inbound seat capacity only increased by 28,267, ostensibly with the demand being mopped up by the wide range of stopover carriers.

This has changed in the aftermath of the pandemic with both Air India and Qantas aggressively adding capacity. While this capacity growth has outstripped demand growth in the short-run, both demand and capacity are likely to continue growing.

Air India will likely continue to grow capacity with several permutations on offer with increases in frequency on the newly introduced Mumbai-Melbourne route and/or adding Mumbai-Sydney.

This growth will compete with other points in both India and Australia. As previously highlighted, the Indian market is fragmented which may favour a route from Bengaluru or the unserved Ahmedabad, Chennai or Hyderabad (to Melbourne or Sydney). Another consideration may be the fragmentation on the Australian side with a route to Brisbane or Perth which accounted for 10% of passengers each in 2016, likely from Delhi.

Air India’s strategy will be influenced by Singapore Airlines since Singapore is now a significant shareholder in Air India after the merger between Air India and Vistara was agreed to in 2022. Singapore Airlines owned 49% of Vistara, which was converted into a 25% stake in Air India as a result of the merger. Singapore’s influence over Air India is palpable, with former Singapore executive Campbell Wilson now at the helm.

This is consequential since Singapore Airlines are the largest airline providing connecting traffic between Australia and India. While greater integration between Air India and Singapore could be useful to both, it’s unlikely that Air India would favour feeding Australian traffic via Singapore as this would ceed ground to Qantas.

Qantas will also likely continue to grow capacity to India. They’ve teased this during the recent announcement of the new terminal development at Perth, while Jetstar have done the same last year.

Qantas are aided by a growing partnership with IndiGo, providing them with domestic connecting capacity in India, as well as supplemental capacity via Singapore. Qantas have scope to increase capacity with increased frequencies on both Melbourne-Delhi and Sydney-Bengaluru, their longer term strategy will likely depend on how effective the IndiGo partnership is at distributing and feeding traffic on the Indian side. A strong and successful partnership in a highly fragmented market may favour consolidation of capacity from multiple Australian cities to a single or small number of destinations in India.