New Delhi : Kingfisher Airlines, Jet Airways, Air Deccan, Paramount Airways and Go First were once among the most talked-about names in Indian aviation. Some promised luxury, some promised cheap fares, and some promised to connect smaller cities. For a while, they expanded fast and flew full aircraft.
Then, one by one, they ran out of money, ran into regulatory trouble, or simply collapsed under their own weight. Their shutdowns were not sudden accidents. They were slow failures that exposed how unforgiving the airline business is in India.
Popular culture has captured this struggle too. The Tamil film Soorarai Pottru showed how difficult it is to even start an airline in India, from fighting bureaucracy to challenging entrenched interests. What the film also hinted at, without fully exploring, is a harder truth. Starting an airline may be heroic, but keeping it alive in India is far more difficult.
Despite India being one of the fastest growing aviation markets in the world today, running an airline here remains one of the toughest businesses.
INDIA’S AVIATION BOOM AND ITS CONTRADICTIONS
India now ranks among the top domestic aviation markets globally. Passenger traffic has crossed 200 million annually.
New airports are coming up in Navi Mumbai, Jewar, Goa and several regional centres. Airlines have placed orders for over 1,900 aircraft, signalling confidence in future demand.
Yet, this growth has not translated into financial stability. Over the past three decades, India has seen dozens of airlines shut down. The list spans different business models, ownership structures and eras.
This repeated pattern suggests the problem is not limited to poor management or bad timing, but lies deeper in the structure of the market.
PRICE SENSITIVE PASSENGERS AND RAZOR-THIN MARGINS
Mansi Singh, Partner at BTG Advaya, says the biggest challenge is India’s extreme price sensitivity.
“India is a very price sensitive market and high demand does not necessarily mean higher profits. As a result, airlines fly at full capacity but the margins are razor thin,” she said.
Amit Mittal, an aviation expert with over two decades of experience in senior leadership roles, explains this from a traveller’s behaviour point of view.
“Even though aviation has grown a lot in the last 15 to 20 years, most people in India still travel by trains, particularly on short routes. Even on longer routes, trains are full. Unless airlines offer strong value, many passengers still choose rail,” he said.
This puts airlines in a constant balancing act. They must keep fares low enough to attract passengers away from trains, while dealing with rising costs that leave little room for profit.
HIGH OPERATING COSTS AND ATF BURDEN
Fuel remains the single largest cost for Indian airlines. Singh points out that aviation turbine fuel accounts for around 40% of an airline’s operating costs in India.
“This is because India has some of the highest taxes on ATF in the world. Volatility caused by supply imbalances, geopolitical tensions and exchange rate fluctuations makes planning extremely difficult,” she said.
Mittal agrees, adding that fuel prices are entirely outside an airline’s control.
“ATF is not something airlines can manage internally. They are forced to pass it on to passengers through ticket prices, but in a competitive market that is not always possible,” he said.
Airport charges add another layer of cost. Airlines pay landing fees, parking fees and user development charges. While some of these costs are passed on to passengers, they still influence pricing decisions and eat into profitability.
Mittal believes this may improve in the long term.
“When new airports like Navi Mumbai and Jewar become fully operational, there will eventually be competition among airports. Over five to ten years, airport charges could see some rationalisation,” he said.
DOLLAR COSTS AND RUPEE REVENUE MISMATCH
A major structural weakness of Indian airlines is currency exposure. Singh explains that most airline expenses are dollar denominated.
“Lease rentals, maintenance costs, fuel and insurance are paid in dollars, while revenues are earned in rupees. Rupee depreciation directly impacts the already weak balance sheets of airlines,” she said.
Mittal added that even though some airlines earn dollars through international routes, the offset is limited.
“Most Indian airlines are still largely domestic operators. Their dollar earnings are not enough to fully cover lease rentals, especially when the rupee depreciates by 2 to 5% every year,” he said.
This mismatch makes Indian airlines more vulnerable to currency swings than many global peers.
WHY INDIA ENDS UP WITH ONE OR TWO DOMINANT AIRLINES
India’s aviation history shows a repeated pattern. Over time, the market narrows down to one or two large players.
Singh attributes this to intense price wars.
“When fares drop, airlines with high fixed costs and thin margins struggle to survive. Eventually, weaker airlines collapse and larger airlines inherit their routes, slots and market share,” she said.
Mittal places this in a global context.
“Aviation is a capital-intensive business. Airlines backed by large corporate groups with deep pockets are better placed to survive shocks like COVID or regulatory disruptions. This is true worldwide. Even in the US, the market is dominated by United, Delta and American Airlines,” he said.
However, he cautions that India’s current level of dominance is unhealthy.
“When one airline controls more than 60% of the market, it creates risks. Ideally, India should have at least three or four strong airlines competing fairly,” he said.
LEGAL UNCERTAINTY AND LESSOR CONFIDENCE
Past airline failures have damaged India’s reputation among global aircraft lessors. During the insolvency of Jet Airways and Go First, lessors faced serious difficulties in repossessing aircraft.
Singh explained that earlier, domestic insolvency laws overrode international conventions.
“This made India a risky jurisdiction. Lessors charged higher rentals, interest rates and insurance premiums to compensate for that risk,” she said.
The Protection of Interests in Aircraft Objects Act, 2025 has changed this legal framework by giving priority to the Cape Town Convention.
“The Act allows quicker repossession and deregistration of aircraft. This could reduce leasing costs and improve access to financing,” Singh said.
Mittal said lessors are now more cautious but also more vigilant.
“They closely monitor maintenance, operations and financial health. For new airlines, confidence depends on management quality, capital strength and realistic business plans,” he said.
INFRASTRUCTURE, SLOTS AND CONGESTION PRESSURE
India’s aviation infrastructure has expanded rapidly, but congestion at major airports remains a serious operational challenge.
Mittal pointed out that peak-hour congestion at airports like Delhi, Mumbai, Bengaluru and Hyderabad limits efficiency.
“One possible solution is the use of larger aircraft on busy domestic routes, as seen in countries like Japan. Better slot management and fair distribution among airlines is also crucial,” he said.
He warned that excessive slot concentration with one airline increases systemic risk if that airline faces disruption.
GOVERNMENT POLICY SUPPORT AND GAPS
Both experts agree that government policy has broadly supported aviation growth. Schemes like UDAAN have opened new regional routes and improved connectivity. New airports have expanded capacity.
However, gaps remain. ATF continues to be taxed under state VAT instead of GST. Aircraft financing by Indian banks is limited. GIFT City has potential as a leasing hub but has yet to attract large-scale global participation.
Mittal also highlighted shortages of pilots, engineers and supply chain delays from aircraft manufacturers as emerging challenges.
For India to produce more sustainable airlines, structural reforms are needed. These include stable leasing laws, access to financing, cost rationalisation, better slot management and regulatory oversight.
Without these changes, India may continue to see airlines rise rapidly and fall just as quickly.
As history shows, full planes and booming airports do not guarantee airline survival. In India, running an airline remains a business where growth is visible, but sustainability is painfully hard-earned.
