Govt May Let Airport Operators Run Airlines: What It Means For India's Aviation Sector

[00:00:00]It's also should focus to the aviation space viewers. Airport operators in the country could now soon be allowed to own and to run airlines. In a major [music] reset and in a major effort to break the virtual duopoly of Indigo and Air India, the government is reportedly considering [music] allowing airport operators to enter the airline space. And if cleared, this move could open the skies to carriers backed by Adani Group and GMR airports as well.

[00:00:25]Current rules cap Delhi and Mumbai airport operators at a 10% stake in any airline, but that restriction may now be eased as well. The reported plans also come in as Indigo and Air India control nearly 90% of the domestic capacity raising concerns over limited competition and passenger choice.

[00:00:43][music] For more on this, uh let me also go across to my colleague Richa Sharma who's joining in with more details on the same. Richa, first up, allowing airport operators in the airline business, what does it mean for the aviation sector at large as well? We've also seen this could probably happen at a time when we've seen in the last 6 months the kind of troubles that Indigo has gone through. Um you know, the memory is pretty fresh with all those visuals of stranded passengers on the airports with luggages and the queues of luggages also lined up there. We also have seen what has happened with Air India in terms of a crash that happened in the Ahmedabad fatal crash as well.

[00:01:18]So, all of it is bringing to the fact that are we safe enough? Um are we putting too much pressure on just two airlines with the kind of demand that is rising and therefore is that the reason why the government is looking at um you know, more variety there.

[00:01:31]>> So, Sakshi, as you mentioned and what we have seen is Indigo and Air India have a duopoly and there have been other airlines, but over the past 4-5 years what we have seen is so many at least 5-6 airlines. We had Jet, we had you know, GoAir and they became you know, burst and the issue was that airline is a very capital-intensive business and profits are very less.

[00:02:00]>> Yes.

[00:02:01]>> So, the government sent to December fiasco happened. The government wanted that more aero airline operators to enter the sector to end this monopoly.

[00:02:10]Now, this plan has been for quite some time where the government has been discussing, you know, that opening up the sector where airport operators can come in. So, that they are bigger players like Adani own operates eight airports. GMR Group also operates five including Delhi Airport.

[00:02:28]But, the thing is that when the Navi Mumbai Airport opened, Jeet Adani himself said that Adani Group is not willing. They are not looking to enter the They're into everything. They are, you know, managing the lounges. They're managing, you know, the >> Yes.

[00:02:44]>> cargo, everything. But, they said they don't want to run an airline because this doesn't suit their business keeping in mind the returns are very low and they would want don't want to get into this business. So, now that the government is again, you know, pushing for it, it has to be seen if big players like Adani who whose focus really is on returns, would they want to enter into this business?

[00:03:06]>> Absolutely. Pankaj, I'm going to be coming to you. Will there be any takers even if the government really opens up the sector like Ritesh pointing out, we do also see that there is a large need to break the duopoly that exists in the aviation market. But, we have seen in the past how many airlines have been grounded and it is for the same reason that it is a very capital-intensive, you know, business to be in even though the traffic is constantly talking about, you know, higher highs, record moves every month that we check the traffic figures. But, the demand is also surging with per capita income rising and, you know, of course, people looking at travel more for leisure as well as business. How are you looking at how the aviation space is going to be panning out and what would you say for Adani Group and GMR Airport that are being looked at as prospective, you know, looking as the options that could be looked at for this.

[00:03:57]>> So, Sakshi, in a in aviation, there are multiple dimensions. One, for example, when you look at Delhi and Mumbai Airport, they were choked for when we had only one uh >> Yeah.

[00:04:08]>> airport and uh slots were not available.

[00:04:10]So, any airline which is sort of looking to launch would want a slot there and 40% of traffic movement happens in these two cities. Now, we solved that problem.

[00:04:20]The other problem is uh of the aircraft.

[00:04:22]Now, when you look at whether it is Air India or IndiGo, these companies had placed order for 5 years back. They yet to get the deliveries of their order.

[00:04:30]And that is also a structural challenge because you have only two major manufacturers. So, a lot of these airlines are not able to operate uh efficient planes because and also the ecosystem for MRO, all that is sort of challenging.

[00:04:46]And which is why I think this is a very difficult space to sort of operating given the multiple challenges. And on top of it, when the crude oil prices rally, the ATF prices also sort of goes up and putting uh Indian carrier at a disadvantage compared to global counterparts.

[00:05:02]>> Mhm.

[00:05:02]>> Uh so, thing of it is definitely fine, but uh for me, I think the biggest choke point is only two players or two major suppliers. So, which is why so anyone looking to ramp up capacity also cannot uh do it even though leasing also happens.

[00:05:18]Uh but I think this is not a easy sector to grow.