Can airport operators own airlines? What India’s rules and airport contracts say

The government’s recent clarification that there is no general policy barring airport operators from owning or operating scheduled airlines has brought the issue of airport-airline cross-holding back into focus.

In a written reply to a question from CPI(M) MP John Brittas, the Civil Aviation Ministry said there is no government policy that generally restricts operators of major airports from holding substantial equity in, or operating, scheduled airlines.

But that does not mean every airport operator can automatically enter the airline business. Some airport concession agreements contain restrictions on cross-ownership, meaning the position can depend on the contractual terms governing a particular airport.

The clarification came days after reports that the Adani Group was seeking a waiver that could pave the way for its entry into the airline business. The Minister of State for Civil Aviation has confirmed that the Airports Authority of India (AAI) received a letter from the group seeking such a waiver, although the government has not yet examined the request.

So, what exactly do India’s rules allow, where can restrictions apply, and what safeguards would be needed if an airport operator also owns an airline?

So, can an airport operator own an airline?

In principle, yes. There is no blanket government policy that prohibits an airport operator from owning or operating a scheduled airline.

However, the position does not end with government policy. Individual airports operate under concession agreements and other contractual arrangements that can impose specific conditions on their operators.

This means an airport operator looking to enter the airline business would need to examine the agreement governing the relevant airport and determine whether any restrictions on cross-ownership apply.

That distinction is central to the current debate.

Where do the restrictions come from?

Aviation expert Sanjay Lazar said the contractual framework governing individual airports needs to be examined closely.

“OMDAs will apply. But that will have to be looked at very closely,” Lazar said.

An Operations, Management, Development and Maintenance Agreement (OMDA) sets out the rights, obligations and operating conditions for an airport. Different airports can have separate agreements, meaning the restrictions applicable to one airport may not necessarily be identical to those applying elsewhere.

Lazar pointed to the Tata Group’s experience in 2019, when it sought to acquire a larger stake in GMR’s airport business. According to him, concerns were raised because of Tata’s interests in airlines at the time, and the proposed stake was eventually scaled back.

The example highlights why the absence of a general government prohibition does not necessarily settle the question. The terms governing a specific airport can also determine whether cross-ownership is permitted.

Why is airport-airline cross-holding controversial?

The main concern is conflict of interest.

An airport operator controls or manages critical infrastructure and services used by airlines. These include slots, gates, parking stands and other facilities.

If the same corporate group also owns an airline, rival carriers could question whether that airline is receiving preferential access.

The issue is therefore not simply whether common ownership should be allowed. It is whether there are sufficient safeguards to ensure that an airport-owned airline and competing carriers are treated on equal terms.

Prem Rajani, Managing Partner at Rajani Associates, argues that common ownership does not automatically create an unacceptable conflict of interest if appropriate safeguards are put in place.

“So long as we are able to have a policy in place which ensures that there is a systematic and no priority landing rights or taking-off rights, and there is no priority of gate allocation,” Rajani said, he believes there should be no harm.

In practice, this would require transparent and non-discriminatory systems for allocating airport capacity and facilities.

Can such restrictions be waived?

This is where the legal question becomes important.

If a restriction exists under an airport-specific agreement, the government would need to determine whether and how that provision can be relaxed.

Rajani believes that if a waiver is required, it should ideally apply more broadly rather than being designed for a particular company.

“I personally believe this would be more of a general waiver, not on a case-by-case basis,” Rajani said.

A company-specific exemption could raise questions about equal treatment and competitive neutrality. A broader policy change or clarification could instead establish common conditions for all similarly placed airport operators.

The exact mechanism, however, would depend on the nature of the restriction and the contractual framework in which it is contained.

Why does this matter for competition?

The debate is taking place against the backdrop of significant concentration across India’s aviation ecosystem.

Lazar pointed out that around half of India’s airports are operated by two large groups — GMR and the Adani Group. At the airline level, he highlighted the dominance of Air India and IndiGo.

That raises a broader question about how much of the aviation value chain should be controlled by a relatively small number of corporate groups.

“Are you breaking the duopoly?” Lazar asked, looking at the issue from the passenger’s perspective.

Allowing airport operators to enter the airline business could potentially bring another large player into the market, adding capacity and competition.

But vertical integration could also create concerns if an airport operator has an incentive or ability to favour its own airline over competitors.

The competitive impact will therefore depend not just on how many airlines operate in the market, but also on whether all carriers have fair access to essential airport infrastructure.

What could it mean for passengers?

For passengers, the potential upside is greater choice and capacity.

A large airport operator entering the airline business could bring fresh capital, add aircraft and potentially create another significant competitor in a market dominated by a few large carriers.

The risk is that greater integration between airport and airline operations could make it harder for rival airlines to compete if they do not receive equal access to airport facilities.

That makes transparent rules for slots, gates and other airport services particularly important.

What happens next?

The immediate test is the waiver request reportedly made by the Adani Group to the AAI.

The government has confirmed that the letter has been received but has not yet examined the request. Any decision will need to consider the relevant contractual provisions governing the airport concerned, alongside the broader government position.

The key question is therefore not simply whether an airport operator can own an airline. It is whether that ownership can coexist with contractual restrictions and safeguards that prevent an airport operator from giving its own airline an unfair advantage.

For India’s aviation sector, the outcome could set an important precedent for how airport ownership, airline ownership and competition are regulated as more companies seek to participate across the aviation value chain.