Will Adani and GMR Get a Major Opportunity? Government Revising Aviation Rules
The Government of India is preparing to amend a key regulation. This change would allow airport-operating companies to launch their own airlines. The Adani Group and GMR Group could directly benefit from this move. Currently, companies operating the Delhi and Mumbai airports are prohibited from holding more than a 10% stake in any airline.
The government is considering relaxing this rule. Citing an Economic Times report, it is noted that the Ministry of Civil Aviation is deliberating on this proposal. The change will only come into effect after receiving approval from the Ministry of Law and the Cabinet led by Prime Minister Narendra Modi. The government aims to foster greater competition in the aviation market, given that IndiGo and Air India together handle approximately 90% of domestic flight operations.
What is the government’s plan?
The government seeks to increase market competition. If Adani and GMR launch their own airlines, it would introduce new competition and likely offer passengers better choices. The Adani Group operates seven airports, including Mumbai, while the GMR Group manages Delhi Airport and four others. A rule change would enable both groups to launch airlines, thereby introducing new players into the Indian aviation sector.
What are the potential concerns?
However, this move also raises certain concerns. If airport owners operate their own airlines, they might allocate prime time slots and superior facilities at their airports to their own carriers, potentially disadvantaging other airline operators. Joint ownership of airports and airlines has not proven very successful globally; the US has strict regulations, while competition laws in the European Union make such arrangements practically difficult.
What is the future of Indian aviation?
The number of airlines in India has declined significantly over the past decade. Carriers like Jet Airways and GoAir ceased operations, while Vistara and AirAsia were merged into the Tata Group. Currently, IndiGo handles over 60% of domestic air passengers. Thousands of flights were cancelled in December due to a shortage of pilots, causing inconvenience to passengers.
