Boon for Commerce, Bane for Aviation: Caveats To India's Road Infrastructure

While road connectivity may foster greater economic growth, the aviation industry will face significant challenges.

The development of improved road infrastructure could pose a potential risk to domestic airlines already struggling to attain profits. 

Image: The Quint

India's ambitious plans to develop a robust road infrastructure have gained significant momentum under the leadership of the Minister for Road Transport & Highways, Nitin Gadkari. The National Highways Authority of India (NHAI) is optimistic about the opportunities that will arise from the construction of expressways which is aimed at reducing travel time in major cities. The anticipated benefits extend beyond commerce and trade, with the potential to uplift rural India, where a substantial portion of the population resides.

Road connectivity plays a pivotal role in fostering the country's overall growth. By enhancing connectivity, trade and tourism are expected to flourish, ultimately benefiting the economy. Furthermore, improved road networks hold the promise of uplifting rural areas that currently suffer from limited connectivity.

Figure 1: Projected routes and the estimated time and distance traveled 

Image: The Quint

A False Wave of Optimism 

While this bodes well for commerce, the aviation industry may face challenges. Operating an airline in India has proven to be a daunting task, evident from the exit of roughly seven airlines in the past decade. The present scenario remains sensitive, with only one profitable airline, IndiGo, which also lacks stability. Although several low-cost carriers exist, none of them have achieved profitability yet.

Adding to the industry's woes, Go First Airlines, backed by the Wadia group, recently initiated bankruptcy proceedings in response to substantial financial losses. The CEO of the airline revealed a staggering monthly deficit of around Rs. 200 crore.

Despite this backdrop, some players, including IndiGo and Air India, have placed massive aircraft orders, totalling 500 and 470 planes respectively. This move may indicate a sense of optimism within the industry, but it does not alter the underlying reality.

As the road network expands and expressways reduce travel time to major cities across India, domestic travel routes for airlines may face disruption. The convenience and accessibility provided by road transport could challenge certain airline routes.

However, the cost of road transport remains a significant concern, particularly with the surge in fuel expenses.

What the Future Holds 

To address this issue, the Indian government has prioritised the adoption of electric vehicles (EVs) and hydrogen fuel-based vehicles. EVs have already gained traction, showcasing immense potential to transform transportation.

On the other hand, hydrogen fuel is still in the developmental phase but holds the promise of significantly reducing costs.

India's ambitious road infrastructure development, including the construction of expressways, will undoubtedly benefit commerce and uplift rural communities.

However, it poses significant challenges for the aviation industry, which has struggled with profitability and stability. The increased road connectivity may disrupt domestic travel routes for airlines, although the cost of road transport remains a concern due to rising fuel expenses. To mitigate these challenges, the Indian government is actively promoting the adoption of EVs and exploring hydrogen fuel alternatives.

As the country navigates this transformative phase, careful consideration and strategic planning are essential to ensure a balanced and sustainable transportation ecosystem for the benefit of all stakeholders.

(Ujvin Nevatia [Proprietor: Nevat Investments] is a SEBI-registered Research Analyst. He tweets @UjvinNevatia. This is an opinion article and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)