The civil aviation ministry’s examination of a proposal to relax restrictions on airport operators owning airlines deserves serious consideration. The existing restriction, embedded in concession agreements when the Delhi and Mumbai airports were privatised in 2006, reflected a legitimate concern: an airport operator with an interest in an airline could potentially favour it in allocating scarce slots, gates, and other infrastructure.
But aviation has changed dramatically in the two decades since. IndiGo and Air India together now account for close to 90% of the domestic market, leaving India unusually dependent on two airline groups. Kingfisher, Jet Airways, and Go First collapsed, while consolidation absorbed other carriers. Yet the outcome is the same. One of the world’s fastest-growing aviation markets lacks a strong third competitor. Recent operational disruptions have also shown that excessive concentration is not merely a matter of fares or consumer choice; it creates systemic vulnerability when problems at one large carrier ripple across the network.
India therefore has a strong policy interest in widening the pool of investors capable of building airlines of meaningful scale. Aviation is brutally capital-intensive, exposed to volatile fuel prices and currency movements, and notoriously thin-margined. India’s airline graveyard demonstrates that ambition and entrepreneurial enthusiasm are no substitutes for patient capital. A serious challenger to the two dominant groups needs deep pockets, a long investment horizon, and the ability to withstand losses while building fleet, network, and market share. Large airport operators are among the relatively small universe of investors that could meet those tests. They understand aviation economics, have experience across the ecosystem, and possess an obvious incentive to expand passenger traffic. A blanket restriction that excludes an entire category of potentially credible investors deserves reconsideration.
The case for reform, however, cannot wish away the reason the restriction existed. Airports are essential infrastructure and, in many cities, effective monopolies. An operator that also owns an airline could theoretically favour its carrier in slot allocation, gates, parking stands, or terminal access, or gain access to commercially sensitive information about competitors. These risks are greater at capacity-constrained airports and require strong safeguards.
Any relaxation should therefore be accompanied by transparent and independently supervised slot allocation, strict non-discrimination requirements, and clear structural and accounting separation between airport and airline businesses. Revenues earned from regulated airport assets should not be used to subsidise airline fare wars. Commercial information belonging to airlines using an airport must be ring-fenced, while competition authorities should have explicit powers to investigate preferential treatment. These protections should be built into concession agreements and the regulatory framework.
Allowing airport operators to invest in airlines will not, by itself, create the third strong carrier India needs. Aircraft availability, airport capacity, entrenched incumbents, and unforgiving economics remain formidable barriers. Nor should policy be designed to facilitate the ambitions of any particular corporate group. The principle should be technology- and promoter-neutral: anyone meeting financial, safety, and competition requirements should have a fair opportunity to enter. The larger question is whether a restriction framed for the aviation market of 2006 remains proportionate to the needs of 2026. Regulation should address identifiable conflicts of interest without unnecessarily shutting out capital that the sector badly needs. India’s aviation market is large enough to support more competition. The new policy regime should open the door to credible new entrants, while ensuring that ownership of the airport never becomes ownership of the playing field.