The year 2006 marked a turning point for the aviation sector in more ways than one. It was the year IndiGo took to the skies, promising affordable air travel with a no-frills model that would eventually redefine the industry. It was also the year Delhi and Mumbai airports were privatised under the Operation, Management, and Development Agreement (OMDA), which contained an important safeguard. Airport operators were barred from owning more than a 10% stake in an airline, lest they use their control over airport infrastructure to favour their own carrier.

Twenty years later, the government is considering relaxing that very clause.

At one level, the proposal appears controversial. IndiGo promoter Rahul Bhatia has warned that allowing airport operators to own airlines would create a massive conflict of interest and eventually hurt consumers. Akasa Air CEO Vinay Dube, on the other hand, has said that the country needs more competition and more investors, while expressing confidence that adequate safeguards can be built into the system. The immediate debate is, therefore, about whether airport operators such as the Adani Group or GMR Airports should be allowed to own airlines.

But the larger story lies elsewhere. It is in how dramatically the aviation sector has changed since 2006 and how regulation is now struggling to catch up with that change.

When the OMDA was drafted, there were no shortage of airlines. Jet Airways dominated the market. Air........

© The Financial Express