Adani Group considers airline entry as Centre mulls aviation rules changes
text_fields
The Adani Group is considering launching an airline, marking a shift from its earlier position of staying away from the carrier business even as it has built a significant presence across India's airport ecosystem, according to sources.
Preliminary discussions on easing restrictions on cross-ownership in the airline and airport sectors have begun at the Ministry of Civil Aviation (MoCA) after the Adani Group sought an enabling policy environment, sources said. If the restrictions are relaxed, the move could also allow airlines to acquire stakes in airports.
The discussions come amid concerns over the dominance of IndiGo and the Air India group, which together account for around 90 per cent of India's domestic aviation market. The government has been pushing for more airlines to operate in the country, with the aim of increasing competition in the sector, sources said.
The Adani Group operates eight airports in India and has a significant presence in other areas of the aviation sector, including ground handling, maintenance, repair and overhaul (MRO), and pilot training. The conglomerate is also planning to establish an aircraft manufacturing facility in India in partnership with Brazilian aerospace company Embraer.
Under the existing rules, operators of Delhi and Mumbai airports are barred from holding more than a 10 per cent stake in a scheduled airline. The Adani Group is seeking the removal of this restriction. It holds a 74 per cent stake in Mumbai airport, while GMR holds a 74 per cent stake in Delhi airport.
Sources indicated that the group is considering setting up and fully owning its own airline rather than acquiring a minority stake in an existing carrier. MoCA is learnt to have initiated preliminary internal discussions and is seeking legal opinion on the issue. Any change to the existing rules would require approval from the Union Cabinet, sources said.
The development marks a shift from comments made by Jeet Adani, who oversees the conglomerate's aviation business. In December, he had said the group was not interested in entering the airline business, arguing that running a carrier did not fit its capital discipline and investment philosophy, which focused on investing in high-margin assets and maximising their potential. The airline business, he had said in a televised interview ahead of the launch of Navi Mumbai airport, was the opposite of that approach.
However, the group's position appears to have changed, driven largely by two factors — the government's push to increase competition and reduce market concentration, and the Adani Group's plans to establish a final assembly line (FAL) for Embraer's passenger aircraft in India.
"Now, it does make sense for the Adani Group to have its own airline, considering the FAL project, for which an Adani-controlled airline would be a ready customer. Although nothing has been finalised yet, as concerns about the airline business in general persist, the idea of potentially owning an airline is under consideration," a source close to the group said.
India's airline industry has witnessed the failure of several carriers due to a challenging operating environment, intense competition in a highly price-sensitive market and global supply chain disruptions.
The government is seeking to encourage financially strong corporate groups with deep pockets to enter the sector, given the challenging conditions in the world's fastest-growing major aviation market.
Concerns over the growing dominance of two airline groups have persisted for several years. These concerns came into sharper focus after IndiGo's network-wide operational crisis in December, which highlighted the potential impact of market concentration. The airline, which commands more than 65 per cent of India's domestic market, faced mass cancellations in early December, severely disrupting the country's aviation sector.
However, some industry insiders and experts believe that any move by the Adani Group to operate an airline could face resistance from existing carriers and other stakeholders because of potential conflicts of interest arising from an airport operator also owning an airline.
Such concerns could include preferential treatment for the group's airline and favourable slot allocation at airports operated by it. Experts said that if the government permits airport operators to own airlines, it must introduce stringent regulatory oversight and ensure that airport and airline operations are run independently.
They also pointed out that launching an airline and building it to a critical scale is a long-term undertaking that could take several years, particularly amid global delays in aircraft deliveries, supply chain challenges and the slow pace of aircraft production.