India's Aviation Sector Demands Continuous Antitrust Scrutiny as Competition Deficit Persists
The Indian aviation industry appears poised for operational stabilization following recent turbulence, yet fundamental competition concerns remain unaddressed. IndiGo, the carrier at the center of last month's flight cancellation crisis, has committed to the Directorate General of Civil Aviation (DGCA) that it will comply with new pilot-fatigue-reduction regulations by February 10th.
Regulatory Compliance and Market Dominance
The airline has assured regulators it will operate a stable schedule without the special exemptions granted after its operational failures disrupted air traffic across the country. This pledge comes after DGCA imposed a substantial fine of ₹22.3 crore on IndiGo and issued warnings against overextending capacity beyond sustainable limits.
While these regulatory actions signal oversight, they occur against a backdrop of concentrated market power. IndiGo commands over 60% of domestic air traffic, with Tata-owned Air India representing the only other significant player. Together, these two private carriers control approximately 90% of India's aviation market, creating what economists term a duopoly structure.
The Elusive Promise of New Competition
Recent announcements from Civil Aviation Minister Kinjarapu Rammohan Naidu identified three potential new entrants: Shankh Air, AlHind Air, and FlyExpress. All have received no-objection certificates from the ministry, with the next step requiring air operator certificates from DGCA.
However, a closer examination reveals significant challenges for these aspiring airlines:
- Capital Requirements: Even modest airline operations demand startup capital between ₹80-100 crore
- Business Viability: FlyExpress's parent company shows a patchy business record with legal complications
- Funding Uncertainties: Shankh Air's commodity trading backer faces long odds for substantial capital raises
- Operational Readiness: AlHind's travel services group presents slightly better prospects but still faces significant hurdles
The global aircraft shortage further complicates expansion plans for smaller existing players like Akasa and SpiceJet, making market share gains increasingly difficult.
Antitrust Implications and Regulatory Response
This persistent competition deficit has rightfully drawn attention from the Competition Commission of India (CCI). Following last month's disruptions, the antitrust regulator announced it would examine the situation under India's competition laws.
It is crucial to distinguish between market dominance, which is not illegal, and abuse of that dominance, which violates antitrust principles. Any investigation would need to carefully navigate this distinction while considering the broader public interest implications of concentrated market power.
Long-Term Market Structure Concerns
The brief exposure of India's aviation network fragility has sparked discussions about more drastic remedies, including corporate breakups similar to historical antitrust actions like AT&T's division into the 'Baby Bells.' While such measures represent last-resort options that require extensive investigation, their mere mention underscores the seriousness of competition concerns.
India's aviation sector stands at a critical juncture. While operational normalization is welcome, the underlying market structure problems require sustained attention. The CCI must maintain vigilant oversight, prepared to intervene if competition doesn't naturally emerge through new market entrants.
Should new competition materialize against current odds, it would represent a positive development for consumers and the industry. If not, persistent antitrust monitoring becomes essential to prevent market power abuses and ensure fair competition in this vital transportation sector.
