Civil Aviation Minister Ram Mohan Naidu has indicated that the government will adopt a cautious stance towards any proposal from the Adani Group to establish an airline. The minister highlighted concerns regarding potential conflicts of interest, given the conglomerate's significant ownership of airports across India.
Conflict of Interest Concerns
Naidu acknowledged the government's desire to expand the number of airlines in India and challenge the existing duopoly dominated by IndiGo and Air India. However, he stressed the importance of carefully evaluating the potential disadvantages of allowing an airport operator to simultaneously run an airline. Government officials have previously noted that cross-ownership models could negatively impact consumers in the long run, as airports typically function as natural monopolies while airlines operate in a competitive market.
Adani's Exploration of an Airline Venture
According to a letter dated June 4, Adani Airports CEO Arun Bansal confirmed that Adani Defence & Aerospace is actively exploring the launch of an airline. This potential venture is envisioned as an integral part of the group's existing aviation ecosystem.
Historical Precedent and Industry Opposition
The issue of cross-ownership is not new. A clause restricting such arrangements was included during the privatization of Delhi and Mumbai airports in 2006. Any modification to this clause would necessitate Union Cabinet approval and would likely face intense scrutiny, especially if perceived to benefit a single entity. Airlines, including IndiGo, have voiced strong opposition to relaxing these restrictions. IndiGo Managing Director Rahul Bhatia warned that allowing cross-ownership would create a “massive conflict of interest” that would ultimately harm consumers.
A notable precedent occurred in 2019 when a proposed ₹8,000-crore investment by the Tata Group in GMR Airports (operators of Delhi and Hyderabad airports) was denied after the Solicitor General opposed it.
Focus on Regional Connectivity
Minister Naidu reiterated the government's preference for promoting the UDAN scheme, which aims to encourage the growth of regional airlines. He suggested that new airlines could focus on specific regions, including enhancing connectivity in India's Northeast. The second phase of the UDAN scheme, backed by a budget of ₹28,840 crore, will utilize a challenge-based system for airport selection, prioritizing factors such as proximity to tourist and industrial hubs, infrastructure readiness, land availability, and state government financial support.