Govt weighs easing rules to allow airport operators to own airlines

Government is considering relaxing ownership rules that could allow airport operators such as Adani Group and GMR Airports to own airlines, aiming to boost competition in the domestic aviation market

By Mihir Mishra

 

India is discussing a policy change that would allow airport operators to run airlines, according to people familiar with the matter, potentially clearing a path for the Adani Group and GMR Airports Ltd. to have their own carriers as the government seeks to boost domestic competition. 

Current rules bar the operators of airports in Delhi and Mumbai from owning more than 10 per cent stake in any airline, said the people, who asked not to be identified because the discussions are private. Shares of IndiGo, India’s largest airline, fell as much as 3.7 per cent and were headed for their biggest drop in two weeks after the report.

   

The deliberations are underway within India’s Ministry of Civil Aviation, and any waiver is expected to require legal clearance from the law ministry as well as approval of the federal Cabinet led by Prime Minister Narendra Modi, the people said. 

A relaxation of ownership restrictions would allow the Adani Group — whose unit operates the Mumbai airport and seven others — and GMR Airports, which manages the New Delhi airport and four additional facilities in India, to own carriers. The aim of the policy is to broaden competition in the market at a time when IndiGo and Air India control nearly 90 per cent of domestic capacity.

 

While that could ease the near-duopoly the top two carriers hold over India’s skies, it also raises the prospect of fresh imbalances, including airport operators possibly allocating prime slots to their own carriers.

 

The civil aviation ministry didn’t immediately respond to an emailed request for comment.

 

While new entrants could theoretically ease that concentration, the global shortage of aircraft remains a major constraint. Delivery delays at Airbus SE and Boeing Co. have slowed expansion plans worldwide , with pandemic-era supply chain disruptions continuing to limit availability.

 

Any move in this direction reflects a broader policy call, said Kapil Kaul, director and chief executive officer at CAPA India. Still, “any new airline may not have an impact in the short- to medium-term since both Boeing and Airbus have a very large backlog — plus continuing supply chain issues — it will take time for new start ups,” he said.

 

Internationally, airport-airline joint ownership has achieved limited commercial success. In the US, strict public ownership of major airfields and Federal Aviation Administration revenue-diversion laws effectively prevent local governments from channeling airport income into airline ventures. In the European Union, joint ownership is technically allowed, but aggressive antitrust enforcement makes it functionally unviable.

 

The Adani Group already has an outsized presence across India’s infrastructure and industrial landscape — from being the country’s largest private ports operator to becoming its second-largest cement producer. In energy, the group’s presence spans thermal generation, city-gas distribution and solar development. Its position as the one of the nation’s largest airport operators recently fueled concerns about its growing influence.

Little Competition

The number of Indian airlines has narrowed sharply over the past decade. 

 

The collapse of Jet Airways India Ltd., Go Airlines India Ltd., along with the merger of Vistara and AirAsia India under the Tata Group, has left IndiGo and Air India in a dominant position in the world’s fourth-largest aviation market — with newer players like Akasa Air, struggling incumbents like SpiceJet Ltd. and smaller regional carriers operating on the margins.

 

Concerns over the duopoly intensified during IndiGo’s operational crisis in December last year, when the airline — which carries more than 60 per cent of domestic passenger traffic — canceled thousands of flights mainly due to pilot shortages. 

 

With few alternatives available, air travel was severely disrupted, prompting Indian Railways to run special trains to move stranded passengers.

 

The limited number of airlines also threatens to constrain future growth. India plans to double the number of airports to 350 by 2047, and the International Air Transport Association forecasts an additional 425 million passengers by 2044, almost tripling from 2024 levels.