Govt will be cautious about Adani Group's airline plans amid conflict of interest concerns, says aviation minister Ram Mohan Naidu

The government will take a cautious approach to any proposal by the Adani Group to start an airline, said Civil Aviation Minister Ram Mohan Naidu on Tuesday. Concerns have been raised over potential conflicts of interest due to the group’s ownership of airports.

As mentioned in a report in The Economic Times, Naidu stated that the government aims to increase the number of airlines in India and break the current duopoly of IndiGo and Air India. However, it is important to examine the possible disadvantages of allowing an airport operator to also run an airline.

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Naidu told the financial daily, “When an airport operator wants to operate an airline, we also have to examine the potential disadvantages. We need to create a system that addresses those concerns.”

In a letter dated June 4, Adani Airports CEO Arun Bansal mentioned that Adani Defence & Aerospace is evaluating starting an airline as part of the group’s existing aviation ecosystem.

Government officials noted that cross ownership could be harmful to customers in the long term. While airlines compete in the market, airports are natural monopolies serving as gateways to cities.

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A clause restricting cross ownership was included when the Delhi and Mumbai airports were privatised in 2006. Any change to this clause would require Union Cabinet approval and could face scrutiny as it may benefit a single company.

Airlines have opposed relaxing this restriction. IndiGo managing director Rahul Bhatia said that allowing cross ownership would create a “massive conflict of interest” and ultimately harm consumers, the report added.

In 2019, approval for an ₹8,000-crore Tata Group investment in GMR Airports, which operated Delhi and Hyderabad airports, was denied after Solicitor General Tushar Mehta opposed it.

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Naidu said the government prefers to promote the UDAN scheme to encourage more regional airlines. He suggested that airlines could focus on specific regions, including connecting the northeast.

The second phase of UDAN has a budget of ₹28,840 crore and will use a challenge-based system for airport selection. This system will consider factors such as proximity to tourist and industrial hubs, infrastructure readiness, land availability and financial support from state governments.