India is exploring a policy change that could allow airport operators to own and operate airlines, potentially opening the aviation sector to new players such as the Adani Group and GMR Airports.
Under
existing regulations, operators of major airports, including those in Delhi and Mumbai, cannot hold more than a 10% stake in any airline.
Discussions are currently underway within the Ministry of Civil Aviation to reconsider these restrictions.
Any relaxation of the rules would require legal review by the Law Ministry and approval from the Union Cabinet headed by Prime Minister Narendra Modi.
The proposed policy shift is aimed at increasing competition in India’s aviation market, where IndiGo and Air India together control nearly 90% of domestic airline capacity.
Allowing airport operators to launch airlines could help reduce the dominance of the two major carriers and provide more options for passengers.
However, the move could also raise concerns over potential conflicts of interest. Airport-owning companies could potentially favour their own airlines by providing better access to airport slots, facilities or other infrastructure.
Adani Group, which operates Mumbai airport along with several other airports, and GMR Airports, which manages Delhi airport and multiple other facilities, would be among the companies that could benefit from the proposed changes.
Globally, airport-airline ownership models have seen limited success. In the US, regulations restricting the use of airport revenues for airline activities prevent such arrangements, while European markets have faced strong competition-related scrutiny.
The proposal comes at a time when India’s airline sector has become increasingly concentrated. The collapse of Jet Airways and Go First, along with the merger of Vistara and AirAsia India with Tata Group airlines, has reduced competition and strengthened the position of IndiGo and Air India.
Concerns over market concentration grew after IndiGo’s operational disruption in December, when thousands of flights were cancelled due to pilot shortages, leaving passengers with limited alternatives.
Despite challenges, India’s aviation market is expected to expand significantly. The country plans to increase the number of airports to 350 by 2047, while the International Air Transport Association projects passenger traffic to rise sharply over the coming decades.
With aircraft supply constraints and delivery delays affecting global airlines, policymakers will need to balance the need for greater competition with safeguards against unfair market practices.
