DECEMBER 7 WAS supposed to be special for Indian aviation. The world’s fastest growing domestic airline market was all set to mark World Civil Aviation Day with events, seminars and awareness campaigns about the importance of civil aviation to a nation’s social and economic development.
Instead, it turned out to be an on-ground demo of aviation’s importance, as market leader IndiGo upended the industry.
In the first week of December, 5.9 lakh tickets were cancelled and lakhs of passengers were stuck in airports, unable to go home, to work, to that all important meeting or interview, or to have a last look at someone beloved. In a viral clip on social media, a couple attended their wedding reception online, because their flight was cancelled. An entrepreneur said the Goa hotel he booked for a Rs7-crore destination wedding was empty because guests were stuck at airports across the country.
IndiGo attributed the chaos to “multitude of… unforeseen operational challenges”, though its reluctance to adhere to the government’s new flight duty time limitations (FDTL) was soon called out as the real culprit. The rules were notified about two years ago, reducing pilot working hours to international safety standards. It meant all airlines would have to recruit more pilots. But Indigo, which operates six of every 10 domestic flights, apparently decided to flex its marketshare muscle rather than recruit more pilots which would have hiked its operational expenses. The result? A nation in upheaval.
“The government would set an example with very, very strict action (against IndiGo) once the probe is complete,” Aviation Minister K. Ram Mohan Naidu told Parliament. A show-cause notice has been issued to the airline by the authorities and the Parliamentary Standing Committee on Aviation has summoned IndiGo’s bosses next week. There are talks of hefty penalties as well.
And then what? Business as usual until the next ‘turbulence’?
“The IndiGo mayhem holds a lesson for the government and regulators,” said Captain G.R. Gopinath, who founded India’s first low-cost carrier, Air Deccan. “A country cannot grow robustly with duopolies, or effective monopolies in any sector. If we had a dozen low-cost airlines, a catastrophe of the scale of IndiGo crippling India would not have happened.”
TIME FOR ‘BABY INDIGOS’?
“The government as a policymaker needs to see that the sector is operating in a fair and a competitive manner and in compliance with rules and regulations,” said Sidharath Kapur, aviation expert and the former CEO of Adani Airports and GMR Airports. “Now, if one of the players is not adhering to it because it thinks that it is too big, and too big to fail, or too big to meet those regulations, then the government needs to take action. The breakup of Indigo is a very, very critical issue which the government needs to look at.”
Indigo was praised till last week for the tight ship it was running. It made handsome profit (around Rs7,000 crore in FY25) when all rivals bled. Now, the same people are calling for corrective action, including a possible breaking down of the airline into smaller ones.
It is not that the government cannot, considering that mobility is an essential service. The past few days were proof enough to show how universal and crucial air travel has become for Indians, with about 35 crore people flying a year.
There is a recently updated Competition Act as well as robust anti-trust laws in place. And there have been actions in controlling market dominance. For instance, the order of the National Payments Corporation of India to market leaders PhonePe and Google Pay to bring down their dominant marketshare down to 30 per cent. It means authorities can show resolve to ensure market fairness, if needed.
In the telecom sector, too, the government stepped in recently to ensure that operator Vi (formerly Vodafone-Idea) did not go under, infusing around Rs16,000 crore to pick up 33 per cent stake in the Birla-run company. It was increased to nearly half the shareholding earlier this year.
The most famous instance of a government intervening to protect the market and customer interest was the breaking up of AT&T, America’s telecom hegemony, in the 1980s. Through actions initiated by the US Justice Department, AT&T was broken up into seven smaller companies, eventually helping to lower cost to consumers and hasten innovation.
“The government can dictate that, on competitive grounds, you need to split up your airline—which it can very well do at this stage. Similarly it can tighten the regulations,” said Kapur. The government has slashed IndiGo’s winter schedule by 10 per cent.
THE MORE THE MERRIER
The flight chaos of the past one week impacted both fliers and the government—people for the trouble they were thrown into, and the government, for the arm-twisting it was subjected to.
The case for corrective action comes from the sheer dominance IndiGo has on India’s civil aviation. While the pre-liberalisation era of domestic aviation, dominated by Indian Airlines, was characterised by indifference in service, the free market era seems to be more symbolised by one player’s domination than any scenario of vibrant competition paving the way for good service and high customer satisfaction.
In fact, nowhere in the free market world does an airline have the kind of dominance that IndiGo has in India. In the US, the world’s biggest aviation market, American Airlines holds less than a quarter of the market, with the top four together accounting for just 75 per cent of the market. In comparison, 92 per cent of India’s aviation market is shared between just two players—IndiGo and Air India.
Of course, it is neither IndiGo’s nor the government’s fault, but a combination of systemic failures. Players like Kingfisher, Jet Airways and recently Go First (GoAir) had to shut shop due to reasons ranging from alleged embezzlement, money laundering, to increase in costs (mainly fuel), to pandemic woes. Among the other national players, SpiceJet has forever been in survival mode, while Akasa, for all its ‘slow and steady’ performance, does face immense financial pressure.
“The government is in no way responsible for Indigo becoming a dominant carrier. But it can address this issue of dominance by looking at it from a competition eye and restricting slots in major metros for IndiGo so that some other carriers achieve better capacity market shares,” said Kapur. “Or more drastic, they need to look at breaking up IndiGo.”
The big question now is whether Naidu and the authorities will be satisfied with applying band-aid on the public anger with token penalties and slap-on-the-wrist actions, or will they use this opportunity to get down deep into the systemic issues plaguing an essential service.