India has initiated discussions on changing its aviation policy to allow airport operators to own and run airlines, Bloomberg reported, citing people familiar with the matter. If approved, the change in policy could potentially permit airport operators like Adani Group and GMR Airports to launch carriers or acquire larger stakes in existing airlines.
The proposal is reportedly still under discussion.
FinancialExpress.com has reached out to the Adani Group for a response and will update the article upon receiving a statement.
What are the current rules?
Existing rules prevent the operators of Delhi and Mumbai airports from owning more than 10% stake in an airline, according to Bloomberg.
Any waiver would reportedly need legal clearance from the Ministry of Law and Justice and approval from the Union Cabinet.
Why is a change being planned?
The reported proposal is intended to surge competition in India’s aviation sector. IndiGo and Air India together handle around 90-% of domestic capacity, as per Bloomberg.
The number of major airlines has declined after the collapse of Jet Airways and Go First, whereas AirAsia India and Vistara have been merged with other Tata Group airlines.
Allowing airport operators to establish carriers could give passengers more choices. However, aircraft shortages and delays in deliveries at Boeing and Airbus could play a hindrance for new players.
Adani and GMR airports’ portfolios
Adani Group forayed into the airport sector through Adani Airport Holdings Ltd, incorporated in 2019 as a wholly owned subsidiary of Adani Enterprises.
At present, Adani Airports operates in Ahmedabad, Lucknow, Mumbai, Gujarat, Jaipur, Guwahati, Mangaluru, Thiruvananthapuram and Navi Mumbai airports.
Adani Airport Holdings Limited owns a 73% stake in Mumbai International Airport Ltd, which itself holds a 74% stake in Navi Mumbai International Airport Ltd. The firm claims to account for 25% of passenger footfalls and 33% of India’s air cargo traffic.
On the other hand, GRM Indian airports assets are Delhi, Hyderabad, Manohar International Airport in Goa, Bidar and Nagpur. It also identifies Bhogapuram International Airport as a project under development.
Could a conflict of interest take place?
Airport operators owning airlines could raise concerns related to whether their carriers would receive preferential access to slots, gates or other facilities. Any change in norms may require safeguards to ensure fair practice among airlines.
As per Bloomberg, joint airport-airline ownership has achieved limited commercial success at a global level and faces regulatory or competition-related hurdles in markets.
India’s passenger traffic is predicted to surge sixfold to around 1.1 billion by 2040. The country’s commercial airline fleet is predicted to widen from 400 aircraft in 2014 to around 2,359 by March 2040. The aviation sector is also projected to support around 25 million jobs by then, strengthening its role in India’s economic development, as per PIB’s official data.
