Will the govt. relax rules on airport-airline ownership?, Pg8

Key Highlights:

• The Ministry of Civil Aviation is reviewing rules on cross-ownership between airport operators and airlines.
• This review follows a request from the Adani Group, which is India's largest airport operator.
• Current restrictions, embedded in airport concession agreements, limit airline ownership in airport operators to 10% or 26% depending on the airport.
• The government aims to foster new airline entrants and address the near-duopoly of IndiGo and Air India groups in the domestic market.
• Proposed changes are likely to include safeguards to ensure an "arm’s length" relationship and prevent conflicts of interest.

Detailed Insights:

• A concept note is being prepared for consultations with NITI Aayog and other government ministries before a proposal goes to the Union Cabinet.
• The Adani Group has signed an MoU with Brazilian manufacturer Embraer to explore local production of passenger aircraft.
• Existing airlines, IndiGo and Air India, have expressed strong opposition, citing potential conflicts of interest and reduced competition.
• Current concession agreements are designed to ensure airports remain neutral infrastructure providers, preventing preferential treatment.
• Safeguards under consideration include preventing the sharing of commercially sensitive information like slot allocation data.
• Prohibiting common key managerial personnel from holding executive positions in both airport and airline entities is also being considered.
• Global examples of cross-ownership, such as in Singapore, Qatar, and the UAE, primarily involve government ownership of both entities.
• The proposed relaxation in India would permit common ownership in a competitive market with multiple privately owned airlines.

Key Concepts Involved:

• Cross-ownership restrictions: Rules limiting the extent to which one entity can own shares in another, especially across different segments of an industry.
• Concession agreements: Contracts between a government entity and a private company granting rights to operate a public service or infrastructure for a specified period.
• Vertical consolidation: The merger or acquisition of companies at different stages of the same production or supply chain.
• Duopoly: A market structure where two companies dominate the market for a particular product or service.
• Arm's length relationship: A business transaction in which buyers and sellers act independently and have no relationship with each other.