The Adani Group has written to the Airports Authority of India (AAI), seeking relaxation of rules governing entry into the airlines business, a company spokesperson confirmed to Financial Express digital.
The confirmation comes amid reports that the group is considering entering the airline business by launching a new carrier or acquiring a stake in an existing one. No final decision has been taken, and the group is evaluating the risks involved in operating an airline.
Why did Adani write to AAI?
Adani’s request concerns cross-ownership restrictions that prevent certain airport operators from holding more than a 10% stake in an airline.
A proposed policy change would make it easier for airport operators to enter the airline business. Financial Express, in its recent report, mentioned that the government is considering easing restrictions that prevent the operators of Delhi and Mumbai airports from owning more than 10% of an airline.
The restriction is part of the Operation, Management and Development Agreement governing the two airports.
It was introduced during their privatisation in 2006 to prevent vertical integration and potential conflicts in allocating airport facilities.
If approved, the change could allow operators like Adani and GMR to launch airlines, acquired large stakes in existing carriers or partners with foreign airlines. As per report by Financial Express, the proposal remains at a preliminary stage and would require legal vetting and Cabinet approvals.
“India needs more airlines and more competition,” a senior government official stated to Financial Express, as mentioned in its report.
Why is Adani considering launching an airline?
The government has privately encouraged business groups, including Adani, to consider entering aviation, as reported by Reuters. The discussions come amid concerns about limited competition and the market’s ability to withstand major disruptions.
“It’s a difficult business, but Adani wants to consider it in national interest,” one source stated to Reuters.
The group is scrutinising multiple possibilities, including establishing a new airline or purchasing a stake in an existing carrier. According to the Reuters source, “all options” remain under consideration.
Adani’s reported interest differs from the stance expressed by Jeet Adani, Director of Adani Airports in December. He stated to the news agency that the group was not interested in running an airline because of its low margins and the different approach required.
“Our comfort and our core competency is in creating hard assets on the ground, long-gestation assets, running them quite efficiently,” he said at that time.
What could it mean for passengers?
India’s domestic aviation market is dominated by two airline groups. IndiGo holds a 65.4% domestic market share, whereas Air India accounts for 25%.
Another financially strong operator could potentially increase competition and offer passengers more options. Its effect on fares, services and routes would, however, rely on Adani proceeding with the plan and receiving regulatory permissions.
Managing an airline also carries considerable risks. High taxes, tough competition and supply chain problems have led to the bankruptcies of Kingfisher Airlines, Go First and Jet Airways over the past 15 years.
Could airport and airline ownership create conflicts?
Adani operates eight airports in India, including Mumbai’s existing airport and the upcoming Navi Mumbai airport. It is also pursuing an $11-billion aviation infrastructure expansion strategy. Supervision can help prevent preferential treatment.
As per Financial Express, the reported policy review assumes that regulatory. The agencies involved include the Directorate General of Civil Aviation and the Bureau of Civil Aviation Security.