Adani eyes launching a new airline for India

India’s largest private airport operator, the Adani Group, is considering entering the airline business, a move that could reshape competition in one of the world’s fastest-growing aviation markets as policymakers look to reduce dependence on the country’s two dominant carriers.

The possibility of Adani launching an airline was first reported by Reuters, which cited two sources with direct knowledge of the discussions.

According to the sources, no final decision has been taken, and the conglomerate is weighing whether to establish a new airline or acquire a stake in an existing carrier.

The sources told Reuters the discussions gained momentum after the Indian government privately encouraged several business groups, including Adani, to consider entering the sector. This followed heightened scrutiny of Air India after last year’s crash and operational disruptions at market leader IndiGo that caused widespread flight cancellations and delays late last year.

“It’s a difficult business, but Adani wants to consider it in national interest,” one of the sources told Reuters, adding that the government believes India’s rapidly expanding aviation market would benefit from the presence of another major airline.

The Adani Group did not immediately respond to Reuters’ request for comment.

India’s largest airport operator could become a new force in the country’s airline market

 If it proceeds, the move would represent a significant change in strategy for the ports-to-cement conglomerate, which has spent recent years building one of India’s largest airport businesses rather than operating airlines.

Through Adani Airports Holdings, the group manages eight airports, including Mumbai, one of the country’s busiest aviation gateways, and is pursuing an $11 billion expansion programme covering airport infrastructure and commercial developments.

Only months ago, Jeet Adani, Director of Adani Airports, told Reuters that the group was not interested in launching an airline because scheduled aviation offered thin margins and did not match the company’s expertise in developing and operating long-term infrastructure assets.

According to Reuters’ sources, however, all options are now under consideration, including acquiring an equity stake in an existing airline rather than starting a carrier from scratch.

Any move would also require regulatory changes. Current Indian rules restrict certain airport operators from owning or controlling scheduled airlines, and Reuters reported that Adani has approached the government seeking changes to those provisions.

Strong passenger demand has not guaranteed profitable airlines in India

The prospect of another major airline comes as India’s aviation sector continues to expand at one of the fastest rates in the world.

The country is now the world’s third-largest domestic aviation market, driven by rising incomes, expanding airport infrastructure and growing regional connectivity.

Passenger traffic has increased several-fold over the past two decades, airlines have placed record aircraft orders, and government initiatives such as the UDAN regional connectivity scheme have extended air services to smaller cities.

Yet the industry’s commercial record tells a very different story.

India’s aviation sector has repeatedly demonstrated that rapid growth in passenger demand does not necessarily translate into sustainable airline economics. Over the past three decades, carriers including East-West Airlines, Damania Airways, ModiLuft, Air Deccan, Kingfisher Airlines, Jet Airways and GoAir have either collapsed or entered insolvency despite operating in an expanding market.

Several regional airlines have also disappeared, while SpiceJet has repeatedly battled liquidity pressures. Air India itself underwent one of the country’s largest corporate restructurings before returning to Tata Group ownership after decades under state control.

The recurring pattern reflects the structural challenges facing Indian airlines, including intense fare competition, high operating costs, volatile fuel prices, currency fluctuations and persistently thin operating margins.

A third major airline could alter India’s competitive landscape

 Despite those challenges, India has become increasingly concentrated around two dominant operators.

IndiGo currently accounts for around 65.4% of the domestic market, while Air India holds approximately 25%, prompting growing discussion within the industry about the need for stronger competition as passenger demand continues to rise.