The Adani Group has approached the government seeking changes to a rule that currently prevents operators of Delhi and Mumbai airports from owning more than a 10 per cent stake in a scheduled airline. If approved, the move could pave the way for the conglomerate to launch its own airline and challenge the dominance of IndiGo and Air India in India’s aviation market.
The development comes just a day after reports suggested that the government was considering allowing airport operators such as Adani Group and GMR Airports to enter the airline business to increase competition in a market where IndiGo and Air India together account for around 90 per cent of domestic passenger traffic.
According to the report, Adani has requested dilution of a clause that was included when Delhi and Mumbai airports were privatised in 2006. The provision bars operators of the country's two busiest airports from holding more than a 10 per cent stake in a scheduled airline.
The Ministry of Civil Aviation is understood to be seeking the opinion of Solicitor General Tushar Mehta on whether the clause can be amended retrospectively. Any such change would require Cabinet approval.
The Adani Group has steadily expanded its presence across the aviation value chain over the past few years. Besides operating eight airports, it has built businesses in pilot training, aircraft maintenance and repair (MRO), and ground handling. The group owns a 74% stake in Mumbai International Airport, while Delhi airport is majority-owned by GMR Airports.
The report said Adani’s latest thinking is also linked to its proposed aircraft manufacturing partnership with Brazilian planemaker Embraer. People familiar with the matter told ET that the group has struggled to generate enough interest from existing airlines to purchase Embraer aircraft and believes having its own airline could help make the manufacturing project commercially viable.
A senior Adani executive quoted in the report said there is "no doubt" there are synergies in operating an airline, but added that no concrete decision has been taken yet and there are currently no advanced discussions to acquire an existing airline. The executive said the group's suggestion to the government was to create an enabling framework without ownership restrictions.
Government officials quoted in the report said the Centre is keen to encourage greater competition in the domestic aviation sector, which is currently dominated by IndiGo and Air India. A well-funded new airline could provide more competition, they said.
Airlines to oppose move
However, the proposal is expected to face strong opposition from existing airlines. Airline executives cited in the report warned that allowing airport operators to own airlines could create conflicts of interest, particularly in the allocation of airport slots, which determine take-off and landing timings and are considered valuable assets at busy airports.
According to the report, government officials said that if the clause is amended, safeguards would be introduced to maintain an arm’s length relationship between airport and airline businesses.
These could include restrictions on sharing commercially sensitive information related to slot allocation and prohibiting common key managerial personnel across the two businesses. Officials also believe India's existing slot allocation rules would help prevent unfair advantages.
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