Adani’s airline plan has govt weighing the runway

The government is exercising caution before allowing the Adani Group to launch an airline, despite the desire to break the duopoly held by IndiGo and Air India. The concern lies in the potential conflict of interest that arises from cross ownership of airlines and airports, as stated by civil aviation minister Ram Mohan Naidu. When an airport operator also operates an airline, a thorough examination of possible disadvantages is required, Naidu added.

While there are advantages to having more airlines, the government is deliberating on the matter. In June, the Adani Group, which holds a 74% stake in Mumbai airport, requested the removal of a clause that restricts the operator of Delhi and Mumbai airports from owning more than a 10% stake in any scheduled carrier. The clause was included when these airports were privatized in 2006, and any changes would require Union Cabinet approval.

Government officials worry that removing such a clause could be viewed as a favor to a single company and would be scrutinized. They believe that while a financially strong group like Adani starting an airline is encouraging, the cross ownership of airlines and airports could negatively impact customers in the long run. The airlines industry already suffers from a duopoly, and allowing a company that owns one of the largest airports in the country to start an airline is a matter that needs cautious consideration, according to a senior government official.

Airlines have strongly opposed any relaxation of the clause. Rahul Bhatia, managing director of IndiGo, said that any move allowing cross ownership would create a massive conflict of interest and ultimately hurt consumers. Similarly, in 2019, the solicitor general opposed Tata Group's ₹8,000 crore investment in GMR Airports, which operated Delhi and Hyderabad airports, due to concerns regarding a potential conflict of interest.

Instead of relaxing the clause, the government is focusing on the UDAN (Ude Desh ka Aam Nagrik) scheme, which subsidizes airlines to operate on less profitable routes. This scheme has been instrumental in encouraging entrepreneurs to start regional airlines. The second phase of UDAN has increased its outlay to ₹28,840 crore and imposes strict criteria for selecting airports to boost regional connectivity.

The selection process will be based on a scoring system that evaluates factors such as proximity to tourist spots, industrial corridors, infrastructure readiness, land availability, and state government commitment to financial contribution.