Centre weighs easing cross-ownership rules between airlines and airports
The Centre is considering removing restrictions on airline ownership in airport operators and vice versa, a move that could pave the way for airline groups
The Centre is considering removing restrictions on airline ownership in airport operators and vice versa, a move that could pave the way for airline groups such as the Tata Group-owned Air India to acquire stakes in airports, according to people familiar with the matter. “The Ministry of Civil Aviation is preparing a concept note for consultations with NITI Aayog and other government ministries on the proposed changes,” said a person aware of the discussions, adding that such a proposal will need a final nod from the Union Cabinet. The proposal comes amid Air India’s interest in expanding into the airport business, the person added. Air India is jointly owned by Tata Sons, which holds a 74.9% stake, and Singapore Airlines, which owns the remaining 25.1%. Some existing airport concession agreements impose limits on airline ownership.
For instance, the concession agreements for the Noida International Airport and Navi Mumbai International Airport projects provide that no scheduled airline, cargo airline or their associates may hold more than 26% of the subscribed and paid-up equity of the concessionaire. The ownership restrictions are even tighter for Delhi and Mumbai airports. Under the original privatisation framework, the aggregate equity held by all Indian scheduled airlines was capped at 10%, while foreign airlines were not permitted to hold any equity in the airport operating companies. These restrictions also operate in reverse, effectively preventing airport operators from owning or controlling airlines. The Adani Group, which operates eight airports and has businesses spanning ports, power and renewable energy, has repeatedly said it has no interest in entering the airline business amid growing discussion around the dominance of Air India and IndiGo, which have a duopoly between them.
The discussions come at a time when the Ministry of Civil Aviation has submitted a proposal to the Public Private Partnership Appraisal Committee (PPPAC) for the third round of airport privatisation of 11 airports, which too will come before the Cabinet for its nod. The government is also revisiting an earlier proposal for the Airports Authority of India (AAI) to divest its entire 26% stake in GMR-operated Delhi International Airport and Adani-operated Mumbai International Airport, the person cited above said. Aviation analysts caution that allowing airlines to own airports, or vice versa, could lead to greater risk concentration. They also warn of potential conflicts of interest, as an airline with a stake in an airport operator could receive preferential treatment in areas such as slot allocation, parking bays, gate access and other operational decisions.
The BriefWire