India’s airline sector faces a harsh reality check after years of rapid growth

Mumbai: One year ago, Prime Minister Narendra Modi praised the airline industry as a symbol of a growing India, set to soar to great heights. However, recent crises at the nation's two main carriers, Air India and IndiGo, have exposed significant safety and regulatory issues in the world's third-largest domestic aviation market.

The situation has been exacerbated by geopolitical tensions that have squeezed profits and forced airlines to reconsider their expansion plans. The industry has faced mounting financial pressures due to rising jet fuel prices and the closure of Pakistani airspace due to tensions between India and Pakistan. India's airline sector has seen an increase in passengers, with over 167 million passengers in the last year, but the sector's growth has outpaced the ability to manage it effectively, leading to mounting losses.

Air India and IndiGo together account for nine out of ten domestic airline seats, highlighting the lack of competition. The sector's dominance has complicated the regulator's task, with seven major airlines either collapsing or being sold in the past two decades. The government is considering relaxing rules that currently prevent airport operators from owning airlines, potentially opening the door for conglomerates such as the Adani Group.

However, addressing the sector's problems requires more than just attracting investors, as the cost structure is deeply problematic.