Introduction

The recent turbulence in the Indian aviation industry has revived another issue that competition law frequently faces only when markets are already unstable: how to respond when an industry with a high degree of concentration is unable to absorb operational shocks? Although the recent disruptions can be generally understood as failure in planning or regulatory control, the magnitude and frequency of recent disruptions reflect a deeper structural issue of loss of competitive discipline in Indian aviation.

India is now one of the largest aviation markets in the world in terms of passenger traffic, which has been made possible by fast growth and liberalization in the last 20 years. The International Air Transport Association (IATA) now says that India is the third-largest domestic aviation market in the world. However, this expansion has failed to produce a widely competitive environment. Rather, the domestic market has been growing more and more concentrated, which is raising some concerns that are beyond the short-term operational failures.

In context to the plethora of competition law, this level of concentration is not a good omen in the market but a warning flag. Section 4 of the Competition Act 2002 (Act) is the definition of dominance which is a state of economic power that allows an enterprise to work out of the competition or to influence the market to its advantage. Although dominance is not condemned under the law, some markets are more volatile than others. The gradual exit and consolidation of competitors have deepened this weakness. Vistara being absorbed into Air India group has practically left India with one full-service airline, rekindling painful memories of previous airline collapses like Kingfisher Airlines in 2012 and Jet Airways in 2019. With every exit, the consumer choice became smaller and competitive pressure was diluted, leaving the market more vulnerable to disruption.

In this blog the authors examine, firstly, examine India’s aviation oligopoly, secondly, draw parallels with foriegn antitrust jurisprudence, and lastly propose institutional and doctrinal reforms.

The Anatomy of India's Aviation Oligopoly: Legal Fault Lines Exposed

India’s aviation sector reflects a structurally concentrated market, with IndiGo representing around 63-65% of domestic passenger traffic according to the report published by the Directorate General of Civil Aviation (DGCA). Although such concentration in the market does not inherently amount to dominance under Section 4 of the Act, however the Indian competition law framework evaluates this dominance holistically based on certain factors such as market share, entry barriers, countervailing buyer power and dependence of consumers. Nevertheless, sustained market concentration of this scale for a prolonged period of time raises genuine competition concerns, especially in situations where the market stability hinges on a single operator.

From the perspective of competition law, such sort of concentration in the market by Indigo revives the discussion and relevance of the essential facilities doctrine, particularly with respect to access to airport slots, ground handling services and other network infrastructure since these services are critical to effective operations by the operator. Despite the absence of a formal refusal to deal, comparative competition law studies recognise that such exclusionary effects may indeed take place when such critical infrastructure and facilities are non-replicable and indispensable. Although Indian competition law jurisprudence has applied this doctrine cautiously, it is highly relevant in the current context as the Indian aviation industry begins to function less as a contestable market and more as a critical infrastructure of the Indian economy.

In the aviation industry, market concentration has far reaching implications especially in the context of regional connectivity. A decrease in the competition hampers connectivity for tier-2 and tier-3 cities which ultimately compromises structural efficiency and creates social inequality in terms of affordability and accessibility for the consumers. Such structural and social effects call for further study and more tightened scrutiny within the effect-based framework of the Act, where harm could also arise in the absence of express exclusionary conduct. In this context, market studies under Section 49 of the Act carry significant analytical significance, as it will empower the Competition Commission of India (CCI) to carefully identify the structural entry barriers within the Indian aviation industry such as high operating costs, capacity constraints and fuel price volatility that distort competition without necessitating proof of abuse. Ensuring fair market conditions for low-cost carriers like Akasa Air and SpiceJet is crucial for promoting competition in an already concentrated aviation industry. These carriers play a significant role in ensuring affordability and regional connectivity, but their growth is hampered by structural barriers as mentioned above rather than inefficiency. This highlights the need for competitive neutral-support in order to preserve competition and consumer welfare by showing how the market structure rather than anti-competitive behavior alone can hamper competition.

Parallelism with Foreign Jurisprudence: Lessons from Global Aviation Antitrust

The competition that is emerging in the Indian aviation industry is not isolated. They are very similar to trends witnessed in other jurisdictions where airline consolidation proceeded more quickly than regulation did. The case of the United States, the United Kingdom and the European Union can demonstrate that structural concentration in the airline markets leads to competitive injury, which can hardly be characterized in terms of traditional abuse-of-dominance. This observation can be applied directly to the situation in India where there is a fast development of market power but enforcement is mostly conduct-based.

The Big Four airline structure in the United States, which followed the merger of four major airlines, demonstrates a fundamental weakness of ex-post antitrust enforcement. These airline competitors became a result of multiple mergers that took place in the 2000s, and now they were able to monopolize approximately two-thirds of domestic air traffic, leaving only small competitors with little room to maneuver. However, competition authorities have found it difficult to prove collusion or intent to exclude under the Sherman Act, despite continuous fare hikes, capacity discipline and service degradation. The market operates under legal parallelism which is maintained by barriers to entry, scarcity of slots and network economies. In the case of India, this highlights an important analytical issue, in the sense that Section 3 & 4 of the Act are not well adapted to deal with oligopolistic coordination in which market structure causes harm and not provable conduct.

The US reaction has consequently grown to be more dependent on sector-based intervention instead of conventional antitrust litigation. Section 411 of the Federal Aviation Act gives the Department of Transportation the power to intervene against unfair practices of competition at an early stage without necessarily demonstrating dominance or actual harm to the consumer. This proactive model is the opposite of the largely reactive stance of the CCI , in which the intervention is mostly performed after the foreclosure of the market or the noticeable price effects. In an industry as capacity-restricted and capital-intensive as aviation, these risks of delaying have normalised domination when legal barriers have been surpassed.

European and UK jurisprudence also helps in reinforcing the structural argument. EU antitrust in aviation always assumes that high market shares are presumptively problematic, despite the absence of immediate price impacts. Remedies like slot divestments and access commitments are not imposed in order to punish past harm but to maintain future contestability. This method is contrary to the merger control practice in India, where the aviation combinations have been mostly passed on the short-term efficiency and countervailing buyer power theories.

In the context of the Indian competition landscape, the key foreign aviation jurisprudential lesson is that airline markets are not ordinary commercial activity, and more critical infrastructure. Such damages in these markets are usually not caused by blatantly illegal behavior but by prolonged market concentration, which blunts competition with time. Past examples in the USA & the UK demonstrate that the consolidation, common ownership and control over key inputs like airport slots may result in soft competition in which an airline may act within the law, but with reduced competition. The dilemma facing the Indian competition law is that Section 4 of the Act targets identifiable abuse whereas harm caused by the aviation sector is more often due to the market structure. This highlights the necessity of more structural intervention earlier, by market studies, surveillance levels, and better coordination between the CCI and the DGCA, to have enforcement that is preventive of fragility rather than of responsive to failure.

Conclusion

The recent turbulence in India’s aviation industry shows that IndiGo’s operational challenges are not isolated irregularities rather indications of a deeper structural concentration. This underscores the significance of an increased institutional coordination between CCI & DGCA, reinforced by a proactive, competition-led regulatory policy. As the aviation industry becomes a critical infrastructure, India needs to transition from reactive to proactive governance by adopting the best global practices.

A significant remedy could be the Aviation Competition Framework built upon periodic evaluation of dominance and market studies. Such a framework would assist in early identification of various structural barriers which would additionally foster competitive entry from emerging carriers including Shankh Air, whose participation suggests untapped potential rather than surplus capacity. In such a scenario, competition serves both structural requirements of efficiency as well as a market ideal. Ensuring competition in this industry isn’t a regulatory luxury, rather the jet fuel for progress grounded on long term economic stability and consumer welfare.

Ankush Kalsule is a law graduate from NLU, Odisha and Mahadev Krishnan is a law researcher.