INDIGO CRISIS IS A RESULT OF POLICY FAILURE, REGULATORY LAXITY AND AN UNBALANCED MARKET STRUCTURE : DAYANAND SINGH

INDIGO CRISIS IS A RESULT OF POLICY FAILURE, REGULATORY LAXITY AND AN UNBALANCED MARKET STRUCTURE : DAYANAND SINGH

19-DEC-ENG 23

RAJIV NAYAN AGRAWAL

ARA----------------------------While India's aviation sector has grown rapidly over the past decade, its inherent weaknesses are also becoming increasingly apparent. The recent widespread disruption at Indigo, the country's largest airline operator, is not merely a problem of one airline, but a consequence of policy failures, regulatory laxity, and an unbalanced market structure within the entire system. In the past few days, hundreds of Indigo flights were cancelled or subjected to indefinite delays, causing massive chaos at several major airports across the country and affecting millions of passengers. The situation became so dire that the Directorate General of Civil Aviation (DGCA) had to intervene by issuing a notice to the airline's CEO, Pieter Elbers. This incident once again highlights the dangers of increasing dependence and weak competition in India's aviation sector.

Indigo blamed the crisis on changes to the Flight Duty Time Limitation (FDTL) rules for pilots, but the reality is far more complex. The rules regarding pilots' rest periods, flight hour limits, and restrictions on night flights put immense pressure on the airline's rostering system. These rules, mandated by a Delhi High Court order in April 2025, were to be implemented in two phases, with some coming into effect on July 1st and the rest on November 1st. Airlines were supposed to restructure their schedules, human resources, and operational capacity to adapt to these changes, but this process was not completed in time. As a result, a severe shortage of pilots emerged, directly impacting the continuity of flights.

However, this is not just a technical or human resources problem. Pilot discontent has been simmering for years. Complaints such as working over 13 hours, delays in expected salary increases, lack of breaks amidst increasing workload, and the airline's "self-serving" interpretation of FDTL (Flight Duty Time Limitations) provisions had been simmering for a long time. When new standards were implemented and the airline requested pilots to cancel leaves or work extra hours, they refused to cooperate. This was a public explosion of the simmering discontent that airlines and regulators had been ignoring for years, but IndiGo's crisis is not merely a result of internal discontent. At its root lies the unbalanced nature of the market structure that India's aviation sector is grappling with. Today, IndiGo holds more than 65 percent of the domestic flight market share, which is an extremely worrying sign for any healthy and competitive market. Experts believe that any disruption in the functioning of a company with such a dominant market share can cripple the entire sector. And that is precisely what happened in the last few days; with IndiGo's flight cancellations, other airlines' fares skyrocketed, passengers couldn't find tickets, and the entire airline network came under immense strain.

Aviation analyst Harsh Vardhan clearly states that IndiGo's monopoly has, in a way, held the entire country hostage, although he also acknowledges that this monopoly is not the creation of any single government but a combined result of policy decisions from the UPA to the NDA governments. In the 2000s and 2010s, companies like Jet Airways, Kingfisher, GoAir, SpiceJet, and Air India were competing in India, but high fuel prices, a complex web of taxes, expensive airport charges, payments in foreign currency, and the devaluation of the rupee gradually weakened the financial health of these companies. One by one, they all went under, and IndiGo, which survived due to its low-cost model and efficient operations, gradually became the undisputed market leader.

The question is, could the government have done anything to prevent this monopolization? Experts believe that India lacks clear rules to prevent monopolies. Neither is there a policy that sets a maximum limit on market share, nor does the government provide sufficient incentives to encourage competition. The actions of the Competition Commission often remain merely formal and do not affect market equilibrium. On the contrary, in many sectors, government policies seem to help large players grow even bigger, be it in the privatization of airports, shipping, or air services.

As a result, today India is left with only one strong airline, IndiGo, and 65% of domestic air passengers depend on it. This situation is not only risky but also dangerous for the economy. India's aviation industry is growing at an annual rate of 10-12%, one of the fastest growth rates in the world. In an economy that depends on global trade, investment, and tourism, if a problem with one airline can cripple the entire network, it indicates serious shortcomings in policy-making.

This crisis has also exposed the complexity of the cost structure of aviation in India. India levies the highest taxes on Aviation Turbine Fuel (ATF) in the world. When crude oil prices rise, the government passes the burden on to the airlines, but even when prices fall, the taxes are not reduced. Airport operators charge exorbitant amounts from both airlines and passengers in the name of various fees. GST, service charges, development fees, usage charges – all these factors make aviation business in India extremely expensive. It has become extremely expensive to operate. Furthermore, the Indian rupee's continuous decline makes operating expenses, which are 60% foreign currency, even more expensive.

This cost structure deters investors from the sector, and this is why new airlines are unable to survive in India. This situation contradicts the government's own development plans, which aspire to see India emerge as a global aviation hub. However, when both infrastructure and policy are not conducive to investment, such goals remain unfulfilled. The Indigo crisis also demonstrated how vulnerable consumers become in a monopoly environment. When one company faces a technical or human resource shortage, passengers are unable to easily access alternative services. Ticket rates rise uncontrollably, and airlines are able to exploit the market due to the lack of alternatives. To control this situation, the government had to impose a temporary cap on fares, indicating that the market was unable to balance itself.

Major reforms are needed to overcome this situation. Experts suggest two major paths. First, rationalize the cost structure of the aviation sector. Bringing ATF under the ambit of GST, regulating airport operators' fees, and reforming the tax structure could be decisive steps in this direction. Second, limit market share. No airline should be allowed to exceed a 30% share. This will maintain competition and prevent any company from becoming so large that its crisis can cripple the entire sector.

Furthermore, the government must create an environment to attract new investment. If IndiGo's market share increased from 32% in 2013 to 65% today, it is proof that other companies are unable to survive. A balanced approach should have been adopted when implementing the FDTL regulations. These regulations are essential for pilot safety and comfort, but implementing them required a phased strategy, adequate training, increased pilot numbers, and a clear policy to support airlines, all of which were missing.

Ultimately, IndiGo's crisis is a serious reminder that India's aviation sector needs not only stronger regulation but also comprehensive restructuring. If competition doesn't increase, cost structures don't improve, and policies don't become investor-friendly, similar crises will recur in the future.

India's aviation sector is one of the fastest-growing in the world, but this growth will only be sustainable if it is supported by sound policy, a balanced market structure, and respect for human resources. IndiGo's crisis isn't just a crisis for one airline; it's a message to the entire system that if reforms aren't made now, the situation could become even more dire tomorrow. For the smooth flow of the country's air travel, trade, regional connectivity, and economy, it is now imperative to give the aviation sector a new direction, where balanced competition and strong policies, not monopolies, form its foundation.