The Centre is examining whether airport operators in India should be allowed to own and operate airlines, potentially opening the door for major airport groups such as Adani to enter the airline business.
Civil Aviation Minister K Rammohan Naidu has said that no final decision has been taken and that the government is studying both the advantages and potential problems associated with airport-airline cross-ownership.
Adani Had Sought Relaxation Of Rules
The issue gained attention after Adani Airport Holdings approached the Airports Authority of India in June seeking relaxation of restrictions that could allow it to invest in, establish, acquire, own or control a scheduled airline.
Adani Airports operates eight airports, including Mumbai, Ahmedabad, Navi Mumbai, Lucknow, Guwahati, Mangaluru, Thiruvananthapuram and Jaipur.
However, Adani Enterprises later said that it was not evaluating any proposal to enter the airline business.
The latest government deliberations could nevertheless create a regulatory framework under which such a move becomes possible.
Current Rules Restrict Airport-Airline Cross Ownership
There is no blanket law preventing every airport operator in India from owning an airline.
However, specific restrictions apply to the operators of Delhi and Mumbai airports under their respective Operation, Management and Development Agreements.
Under the existing arrangements, these airport operators can hold only up to 10% in a scheduled airline.
Relaxing these restrictions would potentially allow airport groups to expand from running aviation infrastructure into operating airlines.
Government Wants More Airlines
The government’s interest in the issue comes as India looks to increase the number of airlines operating in the country.
Naidu has said India needs at least five large airlines, each with fleets of around 100 aircraft, to meet growing demand and improve connectivity.
At present, IndiGo and the Air India group account for a very large share of India’s domestic aviation capacity.
The government therefore wants more carriers to enter the market and expand passenger choices.
But Conflict Of Interest Is A Concern
Allowing an airport operator to own an airline could create potential conflicts of interest.
An airport operator controls or influences important infrastructure used by competing airlines, including airport facilities, parking arrangements, gates and other services.
Questions could therefore arise over whether an airport-owned airline receives preferential treatment compared with rival carriers.
The government has indicated that these concerns will need to be addressed before any policy change is made.
IndiGo Has Opposed The Idea
IndiGo promoter and Managing Director Rahul Bhatia has previously raised objections to allowing airport operators to own airlines.
He has argued that such a structure could create conflicts of interest and affect competition between airlines.
Other industry voices have also called for clear regulatory safeguards if cross-ownership restrictions are relaxed.
GMR Could Also Be Affected
The proposed policy change would not be relevant only to Adani.
GMR Airports operates Delhi airport and several other airports in India. A broader relaxation could potentially give other airport operators greater freedom to participate in the airline sector as well.
However, GMR has indicated that it currently has no plans to enter the airline business.
No Final Decision Yet
The Centre has not approved any change to the existing restrictions.
Naidu has said the government will examine both the potential benefits and disadvantages before deciding whether changes are necessary.
If the rules are eventually relaxed, regulators would also need to determine how airport and airline operations should be separated and how fair access to airport infrastructure would be guaranteed for competing carriers.
For now, the proposal remains under consideration, with the government balancing its push for more airlines against concerns over market competition and potential conflicts of interest.
Summary
The Centre is considering whether airport operators should be allowed to own airlines, potentially opening the door for groups such as Adani to enter the aviation business. Adani Airports had sought a relaxation of existing restrictions, although Adani Enterprises later denied plans to launch an airline. The government says no decision has been taken and is examining the benefits and potential conflicts.