IndiGo has warned that allowing airport operators to own airlines could create conflicts over flight-slot allocation at capacity-constrained airports, as the government considers relaxing restrictions on airport-airline ownership. The airline’s newly appointed chief executive officer, Willie Walsh, said regulators would need to examine the arrangement closely before any decision is taken.
“There is a clear conflict of interest in terms of an airport operator owning an airline and slot distribution. I would expect the regulators to look very closely at that,” Walsh said during an interaction with analysts on October 29.
The government is considering whether to relax contractual restrictions that prevent operators of Delhi and Mumbai airports from owning more than a prescribed stake in a scheduled airline. No final decision has been taken. If the restrictions are eased, large airport operators could potentially establish or acquire airlines.
The central concern is how an airport operator with an airline interest would manage infrastructure used by competing carriers. Airports control or administer access to facilities including take-off and landing slots, gates and aircraft parking areas. At busy airports, slot availability can determine whether airlines are able to add flights or maintain convenient schedules.
IndiGo has argued that airport operators with surplus capital would provide a more direct benefit to airlines and passengers by lowering airport charges rather than entering the airline business. Walsh questioned whether airport operators could successfully operate airlines in a market where established carriers with experienced management teams continue to face difficulty making money.
“This is a brutally competitive industry and we have a lot of experienced airline people who are doing a great job of running those airlines very efficiently but they do not make money,” he said. Walsh added that if airport operators wanted to deploy money in the sector, reducing prices for passengers using their airports could be a simpler route.
The remarks continue opposition from IndiGo’s leadership to a possible relaxation of the ownership restrictions. IndiGo co-founder and managing director Rahul Bhatia had earlier described the proposed arrangement as a “massive conflict of interest”, citing airport control over slots, gates and aircraft parking facilities.
The policy debate comes as the government seeks to encourage more airlines in a market dominated by IndiGo and the Air India Group. Civil Aviation Minister Kinjarapu Rammohan Naidu said in September that the government was weighing the advantages and disadvantages of allowing airport operators to own airlines, while confirming that no decision had been made.
The next step is a government decision on whether the existing contractual restrictions should be changed and, if so, what safeguards would apply to slot distribution, airport access and charges. Until then, the ownership rules remain under consideration.
