The share price of InterGlobe Aviation, which operates IndiGo, plunged 2% on Thursday after the Competition Commission of India ordered a detailed investigation into the airline’s mass flight cancellations in early December, flagging possible abuse of market dominance.
IndiGo share performance
IndiGo shares have remained under pressure in recent months. The stock fell 14.3 per cent in December and declined another 9.2 per cent in January. On Wednesday, the shares slipped more than 2.5 per cent intraday after news of the CCI probe emerged.
The market reaction followed a 16-page order by the competition watchdog, which said there was a prima facie case that IndiGo’s cancellations may have led to an artificial shortage of flights during a period of high demand, affecting passengers and competition alike. The order comes nearly two months after thousands of flights were cancelled due to operational disruptions.
CCI flags artificial scarcity concerns
According to the Competition Commission of India, the large-scale cancellations by IndiGo formed a significant part of its scheduled capacity and effectively meant withholding services from the market.
“Such conduct by a dominant enterprise may be viewed as restricting the provision of services under Section 4(2)(b)(i) of the Act,” the regulator said in its order, as reported by PTI.
Section 4 of the Competition Act deals with abuse of a dominant position. The CCI said that, at this stage, the airline’s conduct appeared to be causing an appreciable adverse effect on competition in India, warranting a detailed investigation by its Director General, the report added.
Operational disruptions and passenger impact
IndiGo faced major operational disruptions in early December, following which the Directorate General of Civil Aviation curtailed the airline’s winter schedule by 10 per cent until February 10, as per PTI.
Between December 3 and 5, a total of 2,507 flights were cancelled and 1,852 flights were delayed, impacting more than three lakh passengers at airports across the country, the regulator said in a statement issued on January 20.
The complaint that triggered the competition probe was filed by a passenger affected by these cancellations. For the purpose of examining the matter, the watchdog considered the “market for domestic air passenger transport services in India” as the relevant market, as reported by PTI.
Dominance in domestic aviation
After examining data from airlines and information provided by the aviation regulator, the CCI said IndiGo consistently accounts for around 60 to 61 per cent of total domestic Available Seat Kilometres.
“The domestic passenger aviation market exhibits very high and increasing concentration, exhibiting that leading firms possess the ability to operate independently of competitive forces, as the presence of effective rivals is materially constrained,” the regulator said, as per PTI.
On the basis of its sustained market share, wide network with exclusive operations on several city-pair routes, a larger fleet and strong financial performance, the CCI said it was of the prima facie view that IndiGo enjoys a dominant position in the relevant market.
IndiGo, which has been holding over 63 per cent of domestic air traffic for several months, saw its share fall to 59.6 per cent in December.
Jurisdiction objections rejected
The watchdog also dismissed IndiGo’s objection that the competition regulator lacked jurisdiction in the matter, citing a Supreme Court ruling.
“Even if TRAI also returns a finding that a particular activity was anti-competitive, its powers would be limited to the action that can be taken under the TRAI Act alone. It is only CCI, which is empowered to deal with the same anti-competitive act from the lens of the Competition Act. If such activities offend the provisions of the Competition Act as well, the consequences under that Act would also follow,” the CCI said, quoting from the ruling, as per PTI.