India is the world's third largest market by departing passengers, but it remains highly under-penetrated even relative to other emerging markets. Its vast population suggests significant potential for growth. Moreover, international capacity accounted for only 33% of seats in the week of 03-Dec-2018, its growth having been constrained by bilateral restrictions.
In addition, compared with its domestic market India's international market has a relatively low share of LCC seats (around 25% versus around 69% in the week commencing 03-Dec-2018). Using a threshold of 4,000km to define long haul, there are only two long haul routes operated by low cost airlines, representing around just 1% of all long haul seats to/from India. And both of these routes are only just above the long haul threshold. India will see its first genuine long haul LCC operation later this week, when WOW air launches Reykjavik-Delhi service on 06-Dec-2018, with a sector length of 7643 km.
The majority of India's foreign tourist arrivals are from long haul source markets, led by the US, UK, Canada and Australia, most of whom make at least one stop to/from India due to the limited capacity on direct services.
Long haul low cost currently represents a negligible share of the Indian airline market, but the conditions exist for it to grow rapidly over time. Indian LCCs are likely to be the key drivers of this segment over the next few years, even though they do not currently operate any long haul routes. Foreign long haul LCCs are also likely to increase their presence in India subject to bilateral relaxation in the case of certain markets.