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Market concentration has climbed steadily across major sectors in India over the past decade, but aviation stands out with the highest level of dominance, as measured by the Herfindahl-Hirschman Index (HHI). The aviation sector’s HHI surged to 4,500 in FY25, more than double the threshold for a “highly concentrated” market under standards used by the antitrust division of the US Justice Department and the European Commission.
The sector has seen the sharpest increase among eight key industries reviewed by Business Standard, with its HHI jumping more than 1,800 points from 2,678 in FY15.
The aviation sector now outstrips even telecom on concentration. Telecom saw its own sharp rise in HHI after Reliance Industries’ entry in 2017, with the sector’s score climbing about 1,500 points over the decade, from 1,670, considered “moderately concentrated”, to 3,174 in the “highly concentrated” band in FY25.
The HHI, used by US and EU competition authorities to assess market concentration and review mergers, flags markets with scores above 1,800 (US) or 2,000 (EU) as highly concentrated. Under US guidelines, a merger that increases HHI by more than 100 points in such markets is presumed to substantially lessen competition. The European Commission takes the same view for increases of 150 points or more.
Across eight major industries in India -- telecom, aviation, cement, iron and steel, tyres, passenger cars, two-wheelers and paints -- the average HHI rose by 550 points over the decade. Aviation’s HHI is now roughly 78 per cent higher than that average.
HHI score is calculated by summing the squared revenue market share (in per cent) of all firms in a sector, giving proportionately greater weighting to the market share of larger firms. Scores range from zero (fragmented markets) to 10,000 (pure monopoly). Very small players barely move the index.
India’s aviation market has long been highly concentrated, with a median HHI of around 2,800 since FY08. Historically, however, this was not a matter of concern because then government-owned Air India, which held roughly a third of the market between FY08 and FY22, was expected to temper aggressive behaviour by private competitors. That changed after the Tata group acquired Air India in FY22 and subsequently merged its other ventures -- Tata-SIA Airlines (Vistara) and AirAsia India --under the Air India umbrella, driving a sharp increase in the airline’s market share.
Today, the sector’s exceptionally high HHI stems mainly from the dominance of the two largest carriers, IndiGo and Air India, which together control roughly 95 per cent of industry revenue in FY25, up from 72 per cent in FY22. By comparison, Reliance Jio and Airtel jointly account for about 76 per cent of telecom revenue, up from 70.4 per cent in FY22.
IndiGo’s revenue share has risen from 40.4 per cent in FY22 to 48 per cent in FY25, while Air India’s has climbed from 31.7 per cent to 46.7 per cent over the same period. IndiGo commands an even larger share of the domestic market, given Air India’s substantial exposure to international routes.
The aviation sector’s concentration has increased in stages, often following the collapse or exit of major carriers. The HHI rose 220 points in FY13 after Kingfisher Airlines shut down. It climbed another 600 points in FY19 when Jet Airways, then the country’s second-largest airline with a 27.4 per cent revenue share, ceased operations. The index then jumped by 1,475 points between FY20 and FY23 as Go First halted operations, Air India changed ownership, and the Tata group consolidated its aviation businesses under one roof.
