Adani, GMR might soon run their own airlines in India
What's the story
The Indian government is mulling a major policy shift that could allow airport operators to own and run their own airlines, as per Bloomberg. The move, if approved, could see companies like Adani Group and GMR Airports entering the airline business. Currently, rules restrict airport operators in Delhi and Mumbai from owning more than a 10% stake in any airline.
Market impact
Adani, GMR could enter airline business
The proposed policy change is being discussed within India's Ministry of Civil Aviation.
If approved, it would allow the Adani Group and GMR Airports to launch their own airlines.
The move is aimed at increasing competition in the market, which is currently dominated by IndiGo and Air India that together control nearly 90% of domestic capacity.
Implementation hurdles
Potential issues with policy change
The proposed relaxation of ownership restrictions would require legal clearance from the law ministry and approval from Prime Minister Narendra Modi's cabinet.
However, this could also lead to new imbalances in the aviation sector, such as airport operators giving preferential treatment to their own airlines.
The civil aviation ministry has not yet commented on these discussions.
Industry constraints
International experience with airport-airline ownership
The global shortage of aircraft, due to delivery delays at Airbus and Boeing, is a major constraint on expansion plans.
Internationally, airport-airline joint ownership has seen limited commercial success.
In the US, strict public ownership of major airfields and FAA revenue-diversion laws effectively prevent local governments from channeling airport income into airline ventures.
Market dynamics
Current state of India's aviation market
The Adani Group already has a huge presence in India's infrastructure and industrial landscape.
Meanwhile, the number of Indian airlines has fallen sharply over the last decade with Jet Airways, Go Airlines going bust and Vistara merging with Air India under Tata Group.
This has left IndiGo and Air India as the dominant players in India's aviation market.