Airport operators may soon own airlines in India? Govt initiates policy-level talks; IndiGo warns of 'massive conflict of interest'

The government has initiated policy-level discussions on a proposal to allow airport operators to own and operate airlines, as part of broader efforts to make the civil aviation sector in India more competitive, government sources said.

According to government sources, the deliberations are at a preliminary stage and are aimed at exploring more options to encourage greater participation and investment in the aviation space.

The government sources further clarified that no discussions have been held with any private entity on the proposal till date, dismissing speculation that consultations with specific airport operators have already taken place.

"The government is committed to making the civil aviation sector more competitive. Policy-level discussions have been initiated, and multiple options are being explored to encourage greater participation in the sector," sources said, adding that stakeholder consultations will be held in due course before any policy decision is taken.

The move, if implemented, could mark a significant transition in the country’s aviation policy by potentially allowing airport operators to expand into airline operations.

IndiGo MD says airport operators owning airlines would create 'massive conflict of interest'

IndiGo Managing Director Rahul Bhatia sharply criticized the proposal on Thursday, cautioning that allowing airport operators to own and run airlines would create a "massive conflict of interest" and noting there is no global precedent for such a model.

Speaking during IndiGo's investor call, Bhatia said, "No global precedent of airport operators owning airlines. Massive conflict of interest if airport operators are allowed to own airlines."

Elaborating on his concerns, Bhatia pointed out that airport operators are directly responsible for allocating critical infrastructure, including airport slots, parking bays and other operational facilities to airlines. Allowing these same operators to run their own airlines would naturally compromise impartiality in asset allocation.

His remarks comes in the wake of media reports indicating that dominant airport developers - the Adani Group and GMR Group - are lobbying to enter the commercial airline market by pushing for revisions to existing airport ownership rules.

As per a Bloomberg New report published on Wednesday, India has kicked off internal discussions on a policy shift that could permit airport operators to own and operate airlines, according to people familiar with the matter.

The proposed policy change could pave the way for major infrastructure conglomerates like the Adani Group and GMR Airports Ltd. to establish their own commercial carriers.

Under existing aviation regulations, operators of airports in Delhi and Mumbai are strictly prohibited from holding more than a 10 per cent stake in any airline, those familiar with the internal talks noted, asking to remain anonymous.

Deliberations are currently taking place within the Ministry of Civil Aviation. Any eventual policy waiver or amendment will require legal clearance from the Ministry of Law and Justice, as well as final approval from the federal Cabinet headed by Prime Minister Narendra Modi, the people said, as quoted by Bloomberg News in the report.

Relaxing these ownership restrictions would enable the Adani Group - whose airport division runs Mumbai International Airport alongside seven others – and GMR Airports, which manages New Delhi's key airport and four additional facilities across India, to build or acquire airline fleets.

The main objective behind the proposed policy overhaul is to broaden the competition in the domestic aviation market, where a dual dominance by IndiGo and Air India currently commands roughly 90 per cent of total seat capacity.

While introducing major conglomerates into the airline market could break up the current near-duopoly stranglehold on Indian airspace, it also introduces significant potential conflicts of interest - most notably the risk that airport managers might give preferential treatment or prime landing slots to their own in-house carriers.

The civil aviation ministry didn’t immediately respond to an emailed request for comment, reported Bloomberg News.