Airport privatisation: FinMin flags oligopoly in aviation sector

The Ministry of Civil Aviation has proposed capping the number of airports that individual operators can win in the forthcoming auction of 11 airports, which will be auctioned as bundles of two or three, after the Ministry of Finance flagged the “oligopolistic nature” of India’s aviation sector, according to a record of discussion made public by the government.

 

Under the new ‘bundling’ model, the government has paired major revenue-generating airports with smaller, loss-making ones into single bundles so that private concessionaires can cross-subsidise the operating and capital expenses of smaller airports using profits from high-traffic hubs.

 

This cap is aimed at limiting market concentration and over-leveraging, or taking on excessive debt, which the government fears could create problems across multiple airport projects, the Civil Aviation Ministry told the Ministry of Finance at the 149th meeting of the Public Private Partnership Appraisal Committee (PPPAC) on August 4. 

 

PPPAC appraises central government’s public private partnership projects above ₹250 crore before it is approved by ministers or the cabinet depending on the size of the project.

 

In February 2019, the Centre privatised six major airports: Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati. After a competitive bidding process, the Adani Group won the rights to run all of them for 50 years.

 

In September 2020, Opposition MPs, including Congress leader K C Venugopal, raised allegations over the award of multiple airports to a single private group and questioned the government’s approach to airport privatisation. The Adani Group took over the six airports between October 2020 and November 2021.

 

India’s airport market is concentrated among a few operators. State-run Airports Authority of India (AAI) manages 129 airports, while Adani Airport Holdings (AAHL), the country’s largest private airport operator by network size, operates eight airports accounting for about 24-25 per cent of passenger traffic and 33 per cent of air cargo.

 

GMR Airports, which operates Delhi and Hyderabad airports among others, has about 27.5 per cent of passenger traffic, according to the company.

 

Together, private operators Adani and GMR account for more than half of India’s air passengers.

 

The airline market is similarly concentrated, with IndiGo and Tata Group-owned Air India Group together accounting for about 91 per cent of domestic passengers in July 2026.

 

The MoF, the MoCA, the Adani Group, IndiGo and Air India did not immediately respond to emailed queries from the Business Standard.

 

Amritsar-Kangra (Amritsar with Kangra in one bundle), Varanasi-Gaya-Kushinagar, Bhubaneswar-Hubballi, Raipur-Aurangabad and Tiruchirappalli-Tirupati — with each bundle to be awarded to a single concessionaire.

 

The bidding process will have one-stage short-listing, with the per-passenger fee for domestic passenger throughput as the bidding parameter.

 

The PPPAC granted in-principle approval to privatisation of five airport bundles at the meeting, the record stated.

 

During the August 4 meeting, a top finance ministry official asked: “Given the oligopolistic nature of the aviation sector, what measures have been envisaged to ensure that the risks related to concentration and over-leveraging are minimised, considering these risks can have a cascading effect across all the projects?,” showed the record.

 

MoCA responded: “The number of airport bundles that may be awarded to a single bidder would be capped to mitigate the risks arising from market concentration and potential over-leveraging, including their possible cascading impact across projects. The modalities of such capping are being finalised and would be submitted as part of the proposal seeking final recommendation by the PPPAC.”

 

The record did not specify the number of bundles that a single bidder will ultimately be allowed to win.

 

During the meeting, another finance ministry official suggested that only projects related to the aviation sector should count when assessing the technical experience of bidders, the record showed.

 

The MoCA, however, proposed allowing bidders with relevant experience across different infrastructure sectors. It said bidders would not need to have aviation-sector experience specifically.

 

Their experience could come from any infrastructure sub-sector listed in a harmonised master list of infrastructure, a government list that defines which sectors and projects are officially classified as infrastructure.

 

This was in line with a decision taken at the 85th meeting of the Public-Private Partnership Appraisal Committee (PPPAC), the MoCA added.

 

The 85th meeting of the PPPAC had taken place on December 11, 2018, a couple of months before the six airports — Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati — were privatised.

 

The record of discussion of the August 4 meeting also showed after the February 2019 privatisation, the Airports Authority of India (AAI) developed the current bundling proposal to leverage the geographic and operational synergies between larger and smaller airports and improve the financial viability of the bundles.

 

The government now plans to seek market feedback before finalising the transaction structure. The MoCA told the PPPAC that, after receiving in-principle approval, it would conduct a fresh market-sounding exercise, meaning it would approach infrastructure players to assess their interest and obtain feedback.

 

The ministry said this bundling arrangement is being proposed for the first time in the airport sector and that feedback from private players could be incorporated before the proposal is submitted for the PPPAC's final recommendation.

 

Private concessionaires will also be required to undertake mandatory development and capacity-expansion work.

 

MoCA said the concessionaire would undertake capital expenditure sanctioned by AAI as well as additional expenditure anticipated during the first seven years for capacity augmentation, subject to applicable traffic or capacity thresholds and Airports Economic Regulatory Authority (AERA) norms.

 

The timing of such expansion would be linked to these triggers rather than fixed time-bound milestones, to avoid premature infrastructure creation if traffic remains below projections.

 

The proposal also provided for a one-year joint management period involving existing AAI employees after the private operator takes over. Thereafter, the concessionaire would be required to retain 60 per cent of AAI employees for up to three years. 

Ground clearance check

 

• In-principle nod to privatisation of five airport bundles
• 11 airports to be offered for privatisation in these bundles
• MoCA proposes limiting the number of bundles one bidder wins
• Airports managed by Adani and GMR together handle over half of India’s passenger traffic
• 91% of domestic passengers fly IndiGo and Air India