The government is considering one of the biggest policy changes in the civil aviation sector since the privatisation of Delhi and Mumbai airports, with a proposal to relax the cross-ownership restrictions that prevent airport operators from owning more than a 10% stake in an airline, as part of a wider strategy to encourage new entrants and reduce the dominance of IndiGo and Air India.
Officials familiar with the discussions said the Ministry of Civil Aviation (MoCA) is examining amendments to the Operation, Management and Development Agreement (OMDA) governing the two airports, under which airport operators are barred from holding more than 10% equity in any airline. The restriction was introduced when the airports were privatised in 2006 to prevent vertical integration between airports and airlines and avoid any potential conflict in allocation of airport infrastructure.
If the proposal is approved, airport operators such as the Adani Group and GMR Airports could either launch airlines, acquire meaningful stakes in existing carriers or partner with foreign airlines looking to establish a larger presence in the domestic market. The proposal is part of a broader package of reforms under discussion, including simplification of licensing procedures by easing the process for obtaining the mandatory no objection certificate (NoC) from the ministry and the air operator permit from the Directorate General of Civil Aviation, with the aim of reducing entry barriers for new airlines.
“India needs more airlines and more competition. The objective is to create an enabling environment for financially strong investors to enter the sector. Airport operators are among the stakeholders who could benefit if the cross-holding restrictions are revisited,” a senior government official said, adding that the proposal remains at a preliminary stage and would require legal vetting and Cabinet approval.
The policy rethink comes as the government is getting increasingly concerned over the concentration in the aviation market. IndiGo alone now accounts for around 66% of the domestic passenger market, while Air India Group has emerged as the second dominant player following the merger of Vistara and AirAsia India. Together, the two groups control nearly 90% of domestic capacity, leaving Akasa Air, SpiceJet and regional carriers with a relatively small share of the market.
Regulatory Protections
Officials said the rationale behind the 2006 restriction has weakened over time because operational decisions such as slot allocation, route approvals and airport infrastructure planning are no longer determined solely by airport operators but are subject to regulatory oversight involving agencies including the DGCA and the Bureau of Civil Aviation Security (BCAS). They believe adequate institutional safeguards now exist to prevent preferential treatment by airport operators towards their own airlines.
The government, however, sees the lack of financially strong airline promoters as a bigger challenge to sustaining long-term growth. The airline industry has shrunk over the past decade following the collapse of Jet Airways and Go First and the consolidation of Vistara and AirAsia India into Air India. The limited number of carriers has also heightened concerns over market resilience, particularly after operational disruptions at IndiGo last year disrupted travel across the country.
Global Precedents
Internationally, airport-airline cross ownership is uncommon. In the US, public ownership of major airports and federal rules effectively prevent airport revenues from being channelled into airline businesses. While such ownership structures are legally possible in parts of Europe, stringent competition regulations and antitrust scrutiny have largely discouraged integrated airport-airline models.