NEW DELHI - A new Indian airline has launched in a country badly hit by the coronavirus pandemic and at a time of massive challenges for the aviation sector.

Flybig, the latest entrant into India's highly competitive aviation sector, started commercial operations on Jan 3 with an inaugural flight connecting Indore in Madhya Pradesh state to Ahmedabad in Gujarat.

The airline, which is operating three flights a week on this route, has started with two planes and plans to scale up to 20 aircraft with 40 to 50 routes in three years' time, said its chief executive, Captain Srinivas Rao.

He said the start-up, which operates the turboprop ATR-72, would focus on regional connectivity but admitted that times were challenging. The airline has 20 per cent to 24 per cent occupancy.

"In fact, the plan was to launch at the end of March or April (last year) and everything was put on hold," said Capt Rao, adding that the airline kept its launch low key. "I think in Covid-19 times, where do you start beating the drum?

"What we are looking to do is connect people and places which are underserved. We believe we have our own space where we can work. There is a lot of growth in this tier 2 space, which hasn't been tapped."

Tier 2 cities have populations between 50,000 and 100,000.

Still, the new airline is taking off at a time when aviation, not just in India, is facing its worst challenge as a result of the pandemic greatly shrinking air travel.

India shut down all international and domestic flights as part of a stringent lockdown last March to curb the coronavirus pandemic. Restrictions have since eased and domestic air travel has resumed but international travel remains limited. India has been operating repatriation flights to multiple countries and has signed air bubble agreements with 22 countries.

According to aviation consultancy CAPA India, traffic growth will remain challenging, with many segments such as business, conference and exhibition travel "unlikely to return until the pandemic is under greater control or deployment of a vaccine is widespread," it said.

India is set to start vaccinations from Jan 16.

At Vistara - a joint collaboration between Singapore Airlines and Tata Sons - expansion plans remain on track, said chief executive Leslie Thng. This includes taking the fleet size from 45 now to about 70 aircraft by the end of 2023.

"We have witnessed a steady increase in domestic air travel in the last quarter of 2020, especially due to the festive season in India, backed by increasing confidence in people for air travel," said Mr Thng, who noted that domestic travel is in a recovery phase entering the new year. "The recent news about the coronavirus vaccine has also given a lot of hope, though a full recovery of international air travel is still afar as the situation is still largely volatile and continues to evolve."

Similarly, Indian low-cost airline Indigo, the country's largest airline, expressed optimism about the domestic sector, which it said would drive recovery, although business travel would remain impaired and impact the profitability of markets.

Mr Ronojoy Dutta, IndiGo's whole time director and CEO, said: "Longer term, we are expecting a shift from rail to air travel to make up for the loss of volumes. Furthermore, we feel fuel prices will probably remain subdued, which will allow the industry to offer affordable fares."

India is seen as an aviation market with a lot of potential but also many challenges. The past decade has seen several airlines, including Kingfisher Airlines and Jet Airways, folding for a variety of reasons, from price sensitivity to under-capitalisation and poor management.

Still, this year could see a consolidation. India's autos-to-steel conglomerate Tata Sons recently increased its stake in Air Asia and, according to Indian media reports, is a bidder for state-run Air India.

"India's aviation sector is set for consolidation and could see a '2-3 airline system' in the near to medium term, and at the heart of this consolidation are the Tata group's aviation ambitions that are now gathering steam," said Mr Rishi Sahai, managing director of financial advisory company Cogence Advisors.

Still, Mr Kapil Kaul, CEO and director of CAPA South Asia, said there was space for a regional airline.

"Subject to strong capitalisation, Flybig can over the next few years emerge as a strong regional player. But we will have to wait till a credible and viable commercial strategy is visible," he said.