Why in news?

The Centre is reportedly weighing policy relaxations that could allow Indian airport operators to own airlines. Preliminary internal discussions are underway, though nothing is finalised.

Such a move could open the door for airport operators like the Adani group and GMR group to enter the airline business.

What’s in Today’s Article?

• Background of the Discussion
• Current Regulatory Restrictions
• The Core Concern: Conflict of Interest
• The Counter-Argument: Capital and Efficiency
• Global Practices
• Safeguards Needed, If Policy Changes

Background of the Discussion

• Initial talks on cross-ownership reportedly followed the Adani group's request for an enabling policy environment, though Adani Enterprises has denied evaluating any airline entry proposal.
• The government has been pushing for more airlines in Indian skies, given that IndiGo and the Air India group together hold over 90% of the domestic market share — a near-duopoly.
• The stated objective behind exploring this policy shift is to foster greater competition in the aviation sector.

Current Regulatory Restrictions

• India currently imposes strict limits on cross-ownership between airports and airlines:
  • Operators of India's largest airports — Delhi (GMR, 74% stake) and Mumbai (Adani group, 74% stake) — are barred from owning more than 10% in any scheduled carrier.
• The reverse restriction also applies: airlines face strict limits on owning airports.

The Core Concern: Conflict of Interest

• Experts warned that allowing airport operators to run airlines would create a "massive conflict of interest" against consumer interests.
• Key risk areas
  • Slot allocation: If an airport operator also runs an airline, and is simultaneously the slot coordinator, there is inherent conflict in allocating prime slots between its own airline and competitors.
  • Infrastructure access: Airlines depend on airports for critical facilities — parking bays, check-in counters, aircraft stands, boarding gates, and ground handling. Any perceived favouritism, even unintentional, could trigger anti-competitive practice allegations.
  • Experts note that even without actual discrimination, the appearance of unequal treatment undermines stakeholder confidence — a key concern for anti-trust regulation, which focuses on maintaining a level playing field, not just proven wrongdoing.

The Counter-Argument: Capital and Efficiency

• Experts acknowledge the rationale behind considering this move:
  • Capital access: New airlines often cannot sustain losses for years against dominant incumbents, but well-capitalised airport operators like Adani and GMR can absorb such risk.
  • Efficiency argument: Since airport revenues increasingly depend on passenger footfall, an airport-owning-airline model could incentivise more flights at lower fares rather than fewer at higher fares.

Global Practices

• Aviation regulators worldwide have generally favoured keeping airports and airlines operationally separate:
  • West Asia: In hubs like Dubai, Abu Dhabi, and Doha, airports and airlines are government-owned but remain distinct corporate entities (e.g., Dubai Airport and Emirates; Etihad and Abu Dhabi airport).
  • Singapore: Changi Airport and Singapore Airlines are linked via state investment but maintain separate management and regulatory oversight.
  • Key distinction: These hub models operate in markets with negligible domestic air traffic and no domestic competition — unlike India, where airlines are largely private and domestic competition is significant.
  • European Union: Enforces some of the world's strictest competition rules, mandating that airport slot coordinators remain functionally independent from any interested party.
  • United States: Most major airports are owned by city/county governments or independent authorities. Federal Aviation Administration grant assurances prohibit airport discrimination among airlines and bar airport revenue from being invested in airlines.
• India's market structure — dominated by private airlines and increasingly private airport operators — makes it structurally closer to Europe than to the West Asian or Singapore hub models.

Safeguards Needed, If Policy Changes

• Experts recommend a watertight regulatory framework, including:
  • Structural separation between airport and airline businesses
  • Independent boards and management teams for each entity
  • Strict protection of carriers' commercially sensitive information
  • Independent airport slot coordinators
  • Transparent gate and terminal allocation policies
  • Enhanced oversight by regulators — the Airports Economic Regulatory Authority of India (AERA), Directorate General of Civil Aviation (DGCA), and the Competition Commission of India (CCI)

Conclusion

Allowing airport operators to own airlines could inject much-needed capital and competition into India's airline duopoly, but it risks compromising the neutrality airports must maintain as shared infrastructure.

Any policy shift will need robust structural and regulatory safeguards to prevent the natural monopoly of airports from tilting the competitive playing field in aviation.