The graveyard of airlines…A grim yet realistic nickname given to the Indian aviation industry in the past. This is because, over time, we have witnessed the fall of multiple prominent carriers, such as Kingfisher Airlines, Jet Airways, Air Deccan and Sahara Airlines.
At first glance, this seems paradoxical, because India is one of the world’s fastest-growing aviation markets, with a large middle-class population and a vast geography. Yet, airlines continued to struggle. Why?
Aviation is a difficult industry
Airlines operate with some of the highest fixed costs in the economy, with aircraft leasing, fuel, maintenance, airport charges, and skilled labour demanding significant upfront investment.Moreover, the market is very sensitive, and a small spike in fuel prices or depreciation in currency can substantially impact profits.
What makes this worse is the lack of pricing power airlines have. Passengers are highly price-sensitive and increasingly informed. With a few clicks, they can view fares across airlines and compare instantly. This drives intense price competition in the market and frequent price wars. Due to which airlines cannot pass rising costs onto consumers. Therefore, although the customer base is large, the margins are low.
Why the “Airline Graveyard”?
Firstly, fuel costs are unusually high and account for over a third of the operating costs . This is due to the Aviation Turbine Fuel (ATF) being taxed heavily by state governments, making it significantly more expensive than in other countries. Secondly, competition has historically been fierce in the aviation industry. Airlines have competed for market share and have been keeping fares low to fill seats. However, while this has incentivized more customers to travel through airplanes, it definitely impacted their balance sheets.
But now, consolidation has reduced the number of players, and one airline in particular has come to dominate Indian skies. Indigo.
The recent Indigo Fiasco
As the Indian aviation sector accelerates towards a projected $25 billion market by 2030, IndiGo has emerged as the dominant carrier in Indian skies, accounting for over 60 per cent of domestic passenger traffic. This has introduced systemic risk in the market, as the operational capacity of a single airline has become a deciding factor to the functioning of the aviation industry, even the economy.
This vulnerability was exposed during the recent IndiGo disruption, where more than 1,000 flights were cancelled over nine days. The sheer magnitude of the disruption reflected IndiGo’s major market position.
The disruption resulted from a combination of factors.
- Regulatory tightening of duty and rest norms: The Directorate General of Civil Aviation introduced revised Flight Duty Time Limitations on November 1, 2025. This reduced allowable pilot duty hours and increased mandatory rest periods, largely lowering usable pilot capacity.
- Pilot shortage: India has approximately 13,000 licensed pilots, but only around 8,000 are actively flying at any given time. For IndiGo, with a fleet of roughly 834 commercial aircraft, the system operates at the lower bound of required pilot capacity. Moreover, although IndiGo had time to implement the new pilot policy and hire, they chose not to.
- Optimistic crew planning for the break: IndiGo’s winter schedule underestimated the impact of the new regulations on available pilot hours and overestimated operational flexibility, particularly during the high-demand vacation season.
Due to IndiGo’s dominant market share, this issue became a nationwide disruption.
What does this mean?
IndiGo’s dominance has delivered lower fares and operational consistency for years. From a consumer welfare perspective, these outcomes are mostly positive. However, concentration in market share has brought about systemic fragility. When a dominant firm experiences operational stress, the possibility of substitution is limited, which increases the impact of disruptions. Unlike before, where the failure of one airline redistributed traffic to other competitors, today’s market lacks the equivalent capacity elsewhere. Therefore, the aviation market has shifted from competitive fragility to concentrated fragility.
The curious case of aviation in India thus lies in this contradiction. The fact that rapid growth and consolidation have reduced competition to the point where market dominance itself poses systemic risk.