India’s aviation sector must be kept under close antitrust watch: Its rivalry deficit won’t end anytime soon

IndiGo has assured the Directorate General of Civil Aviation (DGCA) of its compliance with new pilot-fatigue-reduction norms by 10 February.

The air-carrier said that it would be ready to operate a stable schedule without the rule exemptions it was granted after its failure to run flights threw air traffic into chaos.

To meet this aim, IndiGo had earlier outlined a plan to recruit pilots. But its latest pledge follows a regulatory rap on its knuckles from the DGCA, which levied a fine of ₹22.3 crore on the airline and warned it not to stretch its capacity to a snap-off point again.

If this sounds like a regulatory rebuke that’s too soft, or too pat a way to put the mess behind us, with its costs merely anecdotal at this stage, market power may have a plausible role in it. IndiGo’s share of domestic traffic hovers above 60% and its role in flying people looms over that of Tata-owned Air India, our only other major carrier.

Together, two private players have nine-tenths of India’s market. Akasa, SpiceJet and others are small players, and unless global aircraft scarcity eases, they would be hard put trying to widen their slices of the market’s pie.

A silver lining around last month’s turbulence has been a clamour for more rivalry in Indian skies. In late December, India’s civil aviation minister Kinjarapu Rammohan Naidu had posted an update on the microblog platform X that named three potential market entrants: Shankh Air, AlHind Air and FlyExpress.

As noted by the minister’s post, all had been given no-objection certificates (NoCs) by the ministry. The next step on the trio’s takeoff path would be to get air operator certificates from the DGCA. Going by Lok Sabha records, as reported by Mint, of the three NoCs, only FlyExpress’s was new. The same report also probed their readiness for operations.

What emerged was a dismal picture of small-business hopefuls with insufficient capital and iffy prospects. Estimates of the startup capital needed even for a modest airline range from ₹80 crore to ₹100 crore.

The firm behind FlyExpress was found to have a patchy business record with legal smudges. Neither do the other two inspire much confidence in their ability to make a go of aviation. The odds of a big capital raise by the commodity trading enterprise backing Shankh Air look rather long at this point. So do those of the travel services group trying to launch AlHind, even if a bit less so.

Of course, likelihoods could shift. Even so, given capacity gaps and other relevant factors, we may be lumped with a binary-choice market for quite a while. Alas, the duopoly scenario we stare at today is not a passing phase.

This sector’s rivalry deficit should draw the Competition Commission of India (CCI) into the picture. Last month, this regulator took note of IndiGo’s air disruption and said the issue would be placed under the lens of India’s antitrust law.

Since dominance differs from its abuse, which is illegal, any probe that ensues would be of wide interest. It is telling how a brief exposure of air-network fragility has raked up references to corporate split-ups (think AT&T’s ‘Baby Bells’), even though probes take time and such a drastic remedy can only be antitrust action of last resort. If rivalry rises, somehow, we should celebrate. If not, this sector must be kept under close CCI watch.